OGC Op. No. 06-01-04
The Office of General Counsel issued the following opinion on January 4, 2006 representing the position of the New York State Insurance Department.
May an agent offer a drawing for a free dinner for people whom call his agency to review their insurance?
No. Based on the facts presented this type of drawing would constitute an improper inducement under N.Y. Ins. Law §§ 2324 or 4224.
A new insurance agent in Rochester wishes to place an advertisement in the local newspaper that offers a free drawing for a dinner at a local restaurant, for anyone that calls his office. No purchase of insurance is necessary, however when the caller calls the office, the agent will review their insurance with them.
With respect to property/casualty insurance, N.Y. Ins. Law § 2324 (a) (McKinney Supp. 2006) provides in relevant part:
No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker
With respect to life, accident, and health insurance, N.Y. Ins. Law § 4224 (c) (McKinney Supp. 2006) provides:
No such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract.
The Department has previously opined that there are two requirements to hold a raffle that is not in violation of the anti-rebating provisions. First, the raffle must be open to the public, and second, the ability to win or enter in the raffle must not be an inducement for, or interdependent with the purchase or solicitation of insurance.
In the present case the first requirement is satisfied, as the advertisement in a local newspaper is open to the public. However, the second requirement is not met. The fact that the caller will have his insurance reviewed when entering the drawing shows that the offer of the raffle ticket is interdependent with the solicitation of insurance. Therefore, as long as the callers present insurance policy will be "reviewed" upon calling the agency, then this drawing constitutes an improper inducement in violation of the Insurance Law. See prior opinions by this office on the issue of raffles on our website (www.ins.state.ny.us) (4-08-03 and 10-31-03).
For further information please contact Supervising Attorney Sam Wachtel at the New York City Office.