The Office of General Counsel issued the following opinion on July 2, 2003 representing the position of the New York State Insurance Department.
Re: Use of Credit Card for Premium Payments
What is the basis for the Departments opinion that an insurer that accepts premium payment by credit card must do so for both new and renewal policies?
N.Y. Ins. Law § 4224(a)(1) (McKinney Supp. 2003) prohibits discrimination in any manner whatsoever between individuals of the same class. Permitting premium payment by credit card for new policies but not for renewals, or vice versa, violates this section.
No facts were presented. This inquiry is general in nature.
N.Y. Ins. Law § 4224(a)(1) (McKinney Supp. 2003) provides:
(a) No life insurance company doing business in this state and no savings and insurance bank shall:
(1) make or permit any unfair discrimination between individuals of the same class and of equal expectation of life, in the amount or payment or return of premiums, or rates charged for policies of life insurance or annuity contracts, or in the dividends or other benefits payable thereon, or in any of the terms and conditions thereof;
By its terms, this section is designed to ensure that equal terms are fixed in policies to policyholders of like classes. In effect, this serves to prohibit such practices as hidden rebates or preferential treatment with respect to the cost of the policy or benefits allowed so that all policyholders that fall within the same class will pay alike and be treated alike.
The Department has stated that under N.Y. Ins. Law § 4224(a)(1) a class may appropriately be all applicants for, and insureds under, a particular policy. See N.Y. General Counsel Opinions 2-12-2002 and 12-13-2000. In the inquirers letter, the inquirer asks why initial premiums and renewal premiums are "in the same class." However, it is not the premiums that constitute a class but, rather, the applicants for and insureds under a particular policy. Accordingly, because all insureds who are covered under the same product constitute a class, they must be treated alike. If premium payment by credit card is permitted only for new policies and not for renewals, or vice versa, the members of the class would not be treated equally and there would be a violation of the statute.
For further information one may contact Supervising Attorney Joan Siegel at the New York City Office.