The Office of General Counsel issued the following opinion on September 28, 2005, representing the position of the New York State Insurance Department.
Re: Referrals and Insurance Quotes.
May an insurance agent or broker compensate an unlicensed non-employee for a referral if the compensation is contingent upon the referred person receiving an insurance quotation from the agent or broker?
An insurance agent or broker may compensate an unlicensed non-employee if the compensation is contingent upon the referred person receiving an insurance quotation from the agent or broker provided that such person making the referral is not compensated based upon whether a sale is made and the referral does not include a discussion of specific insurance policy terms and conditions.
A flyer is distributed to unlicensed non-employees to encourage them to make referrals to a licensed insurance agency. To participate, a non-employee fills out an enrollment form specifying his or her name, company name, address and telephone number; and a list of persons that he or she referred to the insurance agency.
The person making the referral earns points for each qualified referral. The points would are redeemable for gift certificates for various merchants.
A referral is a qualified referral only if the referred person visited the agency's office or called one of the agency's representatives; and received an insurance quote.
The "Official Rules" of participation, as specified on the flyer, state that "[a]t no time should insurance specifics be discussed with a prospective lead on our [i.e., the licensed insurance agent's] behalf."
N.Y. Ins. Law § 2115 (McKinney Supp. 2005), is applicable to property/casualty insurance agents and provides, in relevant part, as follows:
(a)(1) No insurer doing business in this state, and no agent or other representative thereof, except as provided in subsection (b) hereof, shall pay any commission or other compensation to any person, firm, association or corporation for acting as insurance agent in this state, except to a licensed insurance agent of such insurer or to a person described in paragraph two or four of subsection (a) of section two thousand one hundred one of this article or except as provided in subsection (c) of this section. For the purposes of this section, "acting as insurance agent" shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person. (emphasis added).
N.Y. Ins. Law §§ 2114 (McKinney Supp. 2005) and 2116 (McKinney Supp. 2005) provide similar exceptions for referrals to life, accident and health insurance agents; and insurance brokers, respectively.
Thus, there is a limited exemption for certain referrals from the prohibition against a non-licensee acting as an insurance agent or broker. Pursuant to the exemption, an agent or broker may compensate an unlicensed person for an insurance referral if the referral does not include a discussion of specific insurance policy terms and conditions; and compensation for the referral is not based on whether a sale is made. Since payment conditioned only upon the person referred receiving a quote does not constitute payment based upon sales, compensation for such a referral would be permitted provided the referral does not include a discussion of specific insurance policy terms and conditions. In such a case, the person making the referral will not be considered to be acting as an insurance agent or broker.
For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.