The Office of General Counsel issued the following opinion on February 6, 2003, representing the position of the New York State Insurance Department.
Re: Licensing Requirements for Independent Adjusters Located Outside of New York.
Does a company located in India have to become licensed in New York as an independent adjuster to perform the activities described in this letter?
Yes. The company must become licensed as an independent adjuster in New York to perform the activities described in this letter.
Mr. A. states that he represents a Delaware corporation that is a subsidiary of one of the largest financial institutions in India. The Delaware corporation will be used to acquire third party administrator ("TPA") business and will then outsource the work to its Indian parent company. Thus, the work will be done exclusively by the Indian parent company. Specifically, the parent company plans to contract with insurers, Health Maintenance Organizations ("HMOs"), Preferred Provider Organizations ("PPO's") and TPA's located in New York that are interested in outsourcing the following functions:
1. Customer acquisition- the activities necessary to bring in business and includes providing underwriting assistance, policy issuance, and agent compensation and licensing functions. The parent company's decisions will be based on objective criteria established by its clients. In situations where the decision is not clear, based on those criteria, the company would go to the client for a decision or, in some cases, the company would be given latitude to make a decision based on client-approved training in the client's underwriting methodology.
2. Policy administration- premium accounting, financial or other controls (such as HIPAA), policy benefits and distribution.
3. Claims management- claims processing, analysis and ultimately adjudication.
4. Customer support- activities would include handling customer inquiries and servicing insurance policies. Mr. As client would set up a call center where calls could be made to a number in United States and the calls would be routed to operators in India. The parent company would also use electronic mail communications.
Mr. A stated in his inquiry that the parent company will perform the activities that he described on behalf of insurers, PPO's and TPA's. The terms PPO and TPA are not defined by the New York Insurance Law. Since Mr. A did not provide sufficient facts regarding the activities that the PPO's or TPA's will be engaging in, the following discussion will be limited to activities conducted on behalf of insurers.
At the outset it should be noted that there is no licensing or registration requirement for TPA's as such under the New York Insurance Law. However, any person or entity, including a TPA, that performs functions that require licensing as an independent adjuster or otherwise must be accordingly licensed.
N.Y. Ins. Law § 2102(a)(1)(McKinney 2000) provides, in pertinent part, that:
(a)(1) No person, firm, association or corporation shall act as an . . . insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
N.Y. Ins. Law § 2101(g)(1)(McKinney 2000) defines the term "independent adjuster", in pertinent part, as follows:
(g)(1) [A]ny person, firm, association or corporation who, or which, for money, commission or any other thing of value acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster . . . (emphasis supplied)1
Thus, in accordance with the above, entities that investigate and adjust claims on behalf of insurers must be licensed as independent adjusters. 2 The Department has consistently opined that even entities that function on behalf of exempt insurers must be licensed as independent adjusters, irrespective of whether the insurer itself is required to be licensed. The fact that an insurer is exempted from licensing under the Insurance Law does not create a similar exemption for an entity that is acting on behalf of the insurer. Additionally, under section 2101(g)(1), licensing as an independent adjuster would also be required to investigate and adjust claims on behalf of an independent adjuster.
In determining what constitutes "investigating and adjusting of claims" under section 2101, this Department considers whether the duties performed in the handling of a claim requires the exercise of discretionary authority conferred by the insurer, as opposed to the performance of strictly ministerial tasks. Past opinions have held that activities such as reviewing and processing claims, authorizing payments, issuing and signing checks (after making the determination to issue the check), handling inquiries from insureds, evaluating the merits of a loss, making recommendations to the insurer, are all discretionary acts, while acts such as data processing are ministerial in nature.
In the present case, since the activities that Mr. A described will require the exercise of discretionary authority conferred by the insurers, the parent company would be investigating and adjusting claims within the purview of section 2101(g)(1). The fact that the work will be performed by an entity that is located outside of New York is not dispositive, since adjusting in New York includes communications to New York by mail, telephone, the internet, etc. Consequently, it will have to become licensed as an independent adjuster in New York pursuant to N.Y. Ins. Law Article 21 (McKinney 2000).
Mr. A also stated that the parent company would assist in underwriting policies. Pursuant to N.Y. Ins. Law § 2101(a)(McKinney 2000), the term "insurance agent" means:
(a) [A]ny authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker . . . (emphasis supplied)
Accordingly, if the parent company will be involved in soliciting insurance policies in New York or will exercise underwriting judgment in deciding whether policies should be issued, it may do so only on behalf of an authorized insurer and it will also have to become licensed as an insurance agent. It is unclear from the facts presented the activities that the Delaware subsidiary will engage in to acquire TPA business. If it will perform activities that require licensing, it must also become licensed pursuant to Article 21 of the Insurance Law.
The scope of this opinion is limited to the licensing requirements under the New York Insurance Law. We offer no opinion regarding licensing requirements under any other laws of this state.
For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.
1 Although the statute lists exemptions from this licensing requirement, none of them are applicable to this inquiry.
2 The Department considers HMO's to be insurers that are doing an insurance business in New York within the meaning of section 2101(g)(1). See Office of General Counsel Opinion, dated December 18, 2000.