OGC Op. No. 08-12-03
The Office of General Counsel issued the following opinion on December 19, 2008, representing the position of the New York State Insurance Department.
RE: Sale of Optional Insurance Coverage with Credit Card
May a retail employee sell optional insurance coverage to a customer who opens a store credit card?
No, a retail employee may not sell optional insurance coverage to a customer who opens a store credit card. However, the employee may secure and furnish information for the purpose of group life insurance, group property/casualty insurance, group annuities, or group or blanket accident and health insurance, provided that no commission is paid to the employee for the services.
An employee at the New York branch of a major retailer offers optional “credit” insurance to store customers who open a store credit card. The optional “credit” insurance provides coverage if an insured store customer becomes disabled or unemployed. The cost of the insurance is .22 cents per $100.00 monthly balance on the card.
N.Y. Ins. Law § 2102(a)(1) (McKinney 2006) is relevant to the inquiry. That statute prohibits a person from acting as an insurance producer in New York without a license. The term “insurance producer” is defined in Insurance Law § 2101(k) as “an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.” Insurance Law § 2101(a), in turn, defines “insurance agent” in pertinent part as “any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization…and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract….”
Insurance Law § 2101(o) defines “solicit” as “attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular licensed insurer, fraternal benefit society or health maintenance organization.” Further, “negotiate” is defined in Insurance Law § 2101(m) as “the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from licensed insurers, fraternal benefit societies or health maintenance organizations for purchasers.” Insurance Law § 2101(n) defines “sell” as “to exchange a contract of insurance by any means, for money or its equivalent, on behalf of a licensed insurer, fraternal benefit society or health maintenance organization.”
Thus, as a general matter, anyone who solicits, negotiates, or sells insurance on behalf of an insurer, fraternal benefit society or health maintenance organization must be licensed by the Insurance Department as an insurance agent. However, Insurance Law § 2101(a)(6) sets forth an exception to the definition of “insurance agent,” and permits a person who secures and furnishes information for the purpose of group life insurance, group property/casualty insurance, group annuities, or group or blanket accident and health insurance to do so without obtaining an insurance agent’s license, provided that no commission is paid to the employee for the services. Insurance Law § 2101 provides an identical exception for insurance brokers.
Due to the lack of information provided, the Department cannot opine about the optional “credit” insurance program, or advise whether the specific program comes within the scope of one of the statutory exceptions.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.