The Office of General Counsel issued the following opinion on April 7, 2008 representing the position of the New York State Insurance Department.
RE: Insurance Sub-producers
1. May a licensed individual insurance agent, who has been properly appointed by an insurer, act as a sub-producer for a corporate insurance agent of the same insurer, and receive commissions from the corporate insurance agent?
2. Must the individual agent also be licensed as a sub-licensee of the corporate insurance agent?
3. May such an individual insurance agent also sell insurance on his or her own account?
1. Yes, provided that the agent is properly appointed by the insurer, an individual insurance agent may act as a sub-producer for a corporate insurance agent, and may receive commissions from that corporate insurance agent.
2. Yes, and in order for the sub-producer to be licensed as a sub-licensee, that individual must be an officer or director of the corporate insurance agent.
3. Yes, if the contract with the corporate insurance agent does not prohibit it, an individual insurance agent may also sell insurance on his or her own account.
According to the Insurance Department’s records, the inquirer’s firm is licensed as an insurance agent pursuant to N.Y. Ins. Law § 2103(a) (McKinney 2006). She reports that her firm may wish to appoint an individual insurance agent as a sub-licensee, and ask the questions set forth above.
Insurance Law § 2103(a) and (c), which are relevant to the inquiry, govern the licensing of life and accident & health insurance agents. That statute provides:
(a) The superintendent may issue a license to any person, firm or corporation who or which has complied with the requirements of this chapter, authorizing such licensee to act as an insurance agent with respect to the lines of authority for life insurance, variable life and variable annuity products, or accident and health insurance and sickness or any other line of authority deemed to be similar by the superintendent . . . as specified in such license, on behalf of any insurer, fraternal benefit society or health maintenance organization, which is authorized to do such kind or kinds of insurance or health maintenance organization business in this state.
. . .
(c) Any such license issued to a firm or association shall authorize only the members thereof, named in such license as sub-licensees, to act individually as agents thereunder, and any such license issued to a corporation shall authorize only the officers and directors thereof, named in such license as sub-licensees, to act individually as agents thereunder. Every sub-licensee, acting as insurance agent pursuant to such a license shall be authorized so to act only in the name of the licensee.
Also relevant to the inquiry is Insurance Law § 2112(a), which addresses the appointment of insurance agents. That statute read as follows:
Every insurer . . . doing business in this state shall file a certificate of appointment in such form as the superintendent may prescribe in order to appoint insurance agents to represent such insurer . . . .
The payment of commissions to life and accident & health insurance agents is governed by Insurance Law § 2114(a). That statute states:
(1) No insurer or fraternal benefit society doing business in this state shall pay any commission or other compensation to any person, firm or corporation, for any services in obtaining in this state any new contract of life insurance or any new annuity contract, except to a licensed life insurance agent of such insurer or of such society . . . .
(2) No agent or other representative of any such life insurer or fraternal benefit society shall pay any commission or other compensation to any person for any services of the kind specified in paragraph one hereof, except to a licensed life insurance agent of such insurer or of such society as the case may be.
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With regard to the queries, both the corporate insurance agent, and the individual insurance agent must be appointed as agents by the insurer pursuant to Insurance Law § 2114(a). If he or she is soliciting in the name of the corporate insurance agent, the individual insurance agent must be a sub-licensee of the corporate insurance agent in accordance with Insurance Law § 2103(c). However, nothing in the Insurance Law prohibits the individual insurance agent from soliciting in his or her name, and merely placing the business through the corporate insurance agent. Also, as provided by Insurance Law § 2103(c), only directors or officers of the corporate insurance agent may be designated as sub-licensees.
Unless the contract between the corporate insurance agent and the individual insurance agent provides otherwise, the individual insurance agent is free to solicit business on his or her own account, independently of the corporate insurance agent.
For further information you may contact Principal Attorney Alan Rachlin at the New York City office.