OGC Opinion No. 10-04-02
The Office of General Counsel issued the following opinion on April 26, 2010, representing the position of the New York State Insurance Department.
RE: Wellness Talks and an Annual Health Fair
Questions Presented:
1. May a licensed insurance broker provide wellness talks to the broker’s accident and health insurance clients or potential clients for no separately identifiable charge?
2. May a licensed insurance broker provide wellness talks to the broker’s accident and health insurance clients or potential clients for a separately identifiable charge?
3. If a licensed insurance broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for a separately identifiable charge, then is there a minimum fee that the broker must charge the client or potential client?
4. May a licensed insurance broker set up an annual health fair for the broker’s accident and health insurance clients or potential clients for a separately identifiable charge?
5. If a licensed insurance broker may provide wellness talks to, or set up an annual health fair for, the broker’s accident and health insurance clients or potential clients for a separately identifiable charge, then must the broker form another company to offer these services?
Conclusions:
1. Yes. A licensed insurance broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for no separately identifiable charge, provided that the service provides general information about risk reduction with regard to the accident and health insurance policy or contract. However, the licensed broker must provide the wellness talks in a fair and nondiscriminatory manner to like clients or potential clients.
2. A licensed insurance broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for a separately identifiable charge so long as the separately identifiable charge is based upon a written memorandum that comports with N.Y. Ins. Law § 2119(c) (McKinney 2006) and the guidance set forth in Circular Letter No. 9 (2006).
3. No. There is no minimum fee that a licensed insurance broker must charge an accident and health insurance client or potential client for wellness talks. However, service fees should be reasonable, and an insurance broker should not charge different clients different amounts for the same services.
4. A licensed insurance broker may set up an annual health fair for the broker’s accident and health insurance clients or potential clients for a separately identifiable charge, so long as the separately identifiable charge is based upon a written memorandum that comports with Insurance Law § 2119(c) and the guidance set forth in Circular Letter No. 9 (2006).
5. There is nothing in the Insurance Law or regulations promulgated thereunder that require a licensed insurance broker to form another company to offer these services.
Facts:
The inquirer reports that he is a licensed insurance broker and that he would like to provide wellness talks to his accident and health insurance clients or potential clients for no separately identifiable charge. The inquirer’s clientele is limited to employers with more than fifty employees, and the inquirer would therefore consider any employer with more than fifty employees to be a potential client. The inquirer further reports that the wellness talks “will help educate or share progressive new definitions of how to measure ‘health’ and ‘wellness’,” and that the talks will include diet, exercise, and stress reduction tips. Moreover, the inquirer states that the more employees the accident and health insurance client or prospective client has, the more wellness talks the inquirer will give. For example, if a client or prospective client has sixty employees, then the inquirer may give a wellness talk once a year. If a company has three hundred employees, then the inquirer may give two wellness talks a year. If a company has over one thousand employees, then the inquirer may give four wellness talks a year. The inquirer reports that he would provide wellness talks for no separately identifiable charge for the first year. After that, the inquirer may charge for the wellness talks.
In addition, the inquirer states that if his accident and health insurance clients or potential clients view the wellness talks favorably he would like to set up an annual health fair at which a nurse or physician would test a person’s blood sugar, cholesterol, weight, and blood pressure. However, there would be a separately identifiable charge to participate in this annual health fair.
Analysis:
1. Wellness talks for no separately identifiable charge
The inquirer first asks whether a licensed insurance broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for no separately identifiable charge. As a general matter, a licensed insurance broker may not provide or offer to provide an insured or potential insured with any special benefit or discount, including any rebate from the insurance premium, or any service or other incentive in conjunction with the sale of insurance, that is not specified in the insurance policy or contract, or vice versa. Insurance Law § 4224(c) applies to accident and health insurance, life insurance, and annuities, and states that:
Except as permitted by section three thousand two hundred thirty-nine of this chapter, 1 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. 2
Therefore, as a general matter, a licensed insurance broker may not give or offer to give any person any valuable consideration or inducement not specified in the accident and health insurance policy or contract.
However, an insurance broker may provide services not specified in the insurance policy or contract to an insured or potential insured without violating the anti-rebating and inducement provisions of Insurance Law § 2324(a) if:
1. the service directly relates to the sale or servicing of the policy or contract or provides general information about insurance or risk reduction; and
2. the insurer or insurance producer provides the service in a fair and nondiscriminatory manner to like insureds or potential insureds.
See Circular Letter No. 9 (2009).
Thus, the first question that arises is whether the wellness talks directly relate to the sale or servicing of the accident and health insurance policy or contract or provide general information about insurance or risk reduction. In the situation presented here, the inquirer wishes to offer wellness talks to his accident and health insurance clients and potential clients for no separately identifiable charge. The inquirer reports that the wellness talks “will help educate or share progressive new definitions of how to measure ‘health’ and ‘wellness’,” and that the talks will include diet, exercise, and stress reduction tips. Assuming that the wellness talks will provide general health and wellness information about risk reduction with regard to the accident and health insurance policy or contract, the inquirer may provide that service for no separately identifiable charge.
The second question that arises is whether the inquirer proposes to offer the wellness talks in a fair and nondiscriminatory manner to like insureds or potential insureds. The inquirer reports that he will offer the wellness talks for no separately identifiable charge to any accident and health insurance client or potential client. The inquirer further reports that the more employees the accident and health insurance client or prospective client has, the more wellness talks the inquirer will give. For example, if a client or prospective client has sixty employees, then the inquirer may give a wellness talk once a year. If a company has three hundred employees, then the inquirer may give two wellness talks a year. If a company has over one thousand employees, then the inquirer may give four wellness talks a year. If the inquirer consistently offers his wellness talks for no separately identifiable charge in the foregoing manner, then the inquirer would appear to be providing the wellness talks in a fair and nondiscriminatory manner to like insureds or potential insureds. See OGC Opinion 09-04-10 (Apr. 20, 2009).
2. Wellness talks for a separately identifiable charge
The inquirer next asks whether a licensed insurance broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for a separately identifiable charge. Insurance Law § 2119 applies to written contracts for compensation, and states in pertinent part that:
(c)(1) No insurance broker may receive any compensation, other than commissions deductible from premiums on insurance policies or contracts, from any insured or prospective insured for or on account of the sale, solicitation or negotiation of, or other services in connection with, any contract of insurance made or negotiated in this state or for any other services on account of such insurance policies or contracts, including adjustment of claims arising therefrom, unless such compensation is based upon a written memorandum, signed by the party to be charged, and specifying or clearly defining the amount or extent of such compensation.
(2) A copy of every such memorandum shall be retained by the broker for not less than three years after such services have been fully performed.
Therefore, an insurance broker may not receive any compensation, other than commissions, from any client or potential client for or on account of the sale, solicitation or negotiation of, or other services in connection with, any insurance policy or contract, unless the compensation is based upon a written memorandum, signed by the party to be charged, and specifying the amount of the compensation. 3 The insurance broker must retain a copy of each memorandum for at least three years after the broker fully performs the services.
Further, Insurance Law § 2119(c) applies regardless of the amount of the compensation the broker charges for the services. See Circular Letter No. 9 (2006). Neither the insurance broker nor the insured may waive the requirements set forth in Insurance Law § 2119(c). See id. An insurance broker may charge a service fee that is a percentage of the premium, provided the memorandum clearly explains whether changes in coverage, cancellation of the policy or contract, audits, or other factors will result in changes in the fee. See id. In addition, service fees should be reasonable, and an insurance broker should not charge different clients different amounts for the same services in violation of Insurance Law § 4224(c). See id.
In the situation presented here, the inquirer states that he is a licensed insurance broker and is considering offering his wellness talks to his accident and health insurance clients or potential clients for a separately identifiable charge after the first year of providing wellness talks for no separately identifiable charge. Therefore, the inquirer may offer his wellness talks for a separately identifiable charge, so long as the separately identifiable charge is based upon a written memorandum that comports with Insurance Law § 2119(c) and the guidance set forth in Circular Letter No. 9 (2006).
3. Minimum fee for wellness talks
The inquirer also asks whether there is a minimum fee that a licensed insurance broker must charge its accident and health insurance clients or potential clients if the broker may provide wellness talks to the broker’s accident and health insurance clients or potential clients for a separately identifiable charge. There is no minimum fee that a licensed insurance broker must charge for wellness talks. However, as noted above, service fees should be reasonable, and an insurance broker should not charge different clients different amounts for the same services in violation of Insurance Law § 4224(c). See Circular Letter No. 9 (2006).
4. Annual health fair for a separately identifiable charge
The inquirer further asks whether a licensed insurance broker may set up an annual health fair for the broker’s accident and health insurance clients or potential clients for a separately identifiable charge. As stated above, an insurance broker may not receive any compensation, other than commissions, from any insured or potential insured for or on account of the sale, solicitation or negotiation of, or other services in connection with, any insurance policy or contract, unless the compensation is based upon a written memorandum, signed by the party to be charged, and specifying the amount of the compensation pursuant to Insurance Law § 2119(c).
Here, the inquirer reports that he is a licensed insurance broker and that if his accident and health insurance clients or potential clients view the wellness talks favorably, then he would like to set up an annual health fair for the clients or potential clients at which a nurse or physician would test a person’s blood sugar, cholesterol, weight, and blood pressure. However, there would be a separately identifiable charge to participate in this annual health fair.
The inquirer may set up an annual health fair for his accident and health insurance clients or potential clients for a separately identifiable charge, so long as the separately identifiable charge is based upon a written memorandum that comports with Insurance Law § 2119(c) and the guidance set forth in Circular Letter No. 9 (2006). Note, however, that this opinion is limited to the Insurance Law and regulations promulgated thereunder, and does not opine on other New York laws, such as the Public Health Law.
5. Forming another company to provide wellness talks and set up an annual health fair for a separately identifiable charge
Lastly, the inquirer asks whether a licensed insurance broker must form another company if the broker may provide wellness talks to, or set up an annual health fair for, the broker’s accident and health insurance clients or potential clients for a separately identifiable charge. There is nothing in the Insurance Law or regulations promulgated thereunder that require a licensed insurance broker to form another company to offer these services.
For further information, you may contact Senior Attorney Joana Lucashuk at the New York City Office.
1 Insurance Law § 3239 applies to wellness programs.
2 Insurance Law § 2324(a) sets forth similar language with regard to property/casualty insurance.
3 Note that in contrast to an insurance broker, a licensed insurance agent may not receive any compensation other than commissions, for or on account of the sale, solicitation or negotiation of, or performance of other services in connection with, any insurance policy or contract, because Insurance Law § 2119 does not set forth a similar provision for insurance agents. See Circular Letter No. 9 (2009); OGC Opinion 08-04-03 (Apr. 1, 2008).