OGC Op. No. 06-05-01
The Office of General Counsel issued the following opinion on May 1, 2006, representing the position of the New York State Insurance Department.
Promotional Discounts N.Y. Ins. Law § 2324 (McKinney Supp. 2006)
May a licensed insurance producer give to insureds a free Carfax vehicle history report with every vehicle insured through his office?
No. The free Carfax vehicle history report would constitute an unlawful inducement in violation of N.Y. Ins. Law § 2324 (McKinney Supp. 2006).
The inquirer proposes to offer a free Carfax vehicle history report with every vehicle insured through his/her agency. The report costs an insured $19.99 if purchased independently, but costs the agency only $12.50 or less.
N.Y. Ins. Law § 2324 (McKinney Supp. 2006), entitled "Rebating and discrimination," is applicable to property/casualty insurance and provides in pertinent part as follows:
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 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. . .(emphasis added).
Thus, in accordance with the express language of N.Y. Ins. Law § 2324(a) (McKinney Supp. 2004), insurers, brokers, agents and their employees and representatives are prohibited from directly or indirectly offering inducements or valuable consideration, other than an article of merchandise not exceeding $15 in value in connection with the sale of insurance, when such inducements or valuable consideration are not specified in the insurance policy.
In the present case, the offer of a free Carfax vehicle history report violates N.Y. Ins. Law § 2324(a) (McKinney Supp. 2006) because it clearly induces insureds or prospective insureds to procure insurance through the agency by offering the added benefit of receiving a free Carfax vehicle history report, which is not specified in the insurance policy.
Moreover, the Carfax vehicle history report is not an article of merchandise within the meaning of N.Y. Ins. Law § 2324(a) (McKinney Supp. 2006). The article of merchandise that § 2324(a) contemplates is a "keepsake," not exceeding $15 in retail value, which conspicuously bears the agency's name and is designed to keep the agency's name before the customer through the conspicuous stamp or printing thereof. Inasmuch as the report being offered is not a "keepsake" within the meaning of the statute, it would not fall under the "keepsake" exception of N.Y. Ins. Law § 2324(a) even if the agency name was placed on it.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.