OGC Opinion No. 06-11-04: Payment by Credit Card

OGC Op. No. 06-11-04

The Office of General Counsel issued the following opinion on November 2, 2006, representing the position of the New York State Insurance Department.

Re: Payment by Credit Card

Question Presented:

May an insurance broker permit an insured to pay insurance premiums by the use of a credit card?

Conclusion:

There is no prohibition in the New York Insurance Law against the use of a credit card to pay the premium on an insurance policy.

Facts:

The Department was asked as to whether an insurance broker may collect the down payment on an insurance policy through the use of a credit card. The broker also indicated that he would be engaged in premium financing and had some questions pertaining to licensing.

Analysis:

The Department has long held that insurance premiums may be paid by credit card. However, in interpreting the anti-rebating and anti-discrimination provisions of N.Y. Ins. Law § 2324 (McKinney 2006) and N.Y. Ins. Law § 4224 (McKinney Supp. 2006), the Department has concluded that where an insurer, agent, or broker agrees to accept payment by credit card, it cannot accept it from some insureds but not other insureds that are within the same general class. Thus, if an insurance brokerage will make credit card payment available to insureds, it must make credit card payment available to all insureds within the same general class. For example, it would not be proper for the broker to limit credit card use to only persons that also financed the policy.

Credit card transactions must be treated in the same manner as checking transactions and an insurance agent or insurance broker that receives such payment must comply with the fiduciary responsibility and premium account requirements contained in N.Y. Ins. Law § 2120 (McKinney 2006) and N.Y. Comp. Codes R. & Regs. tit. 11, § 20.3 (2006) (Regulation 29).

With respect to the brokers questions regarding licensing to engage in premium financing, such activities are regulated by the New York Department of Banking, 2 Rector St. New York NY 10006; telephone number 212-618-6445, and questions should be directed to it.