Unless an employer association has an insurance producer license, a New York state insurance agent cannot pay the association for access to its employer members.
Officials in the general counsel's office at the New York State Insurance Department come to that conclusion in Office of the General Counsel (OGC) Opinion Number 11-01-02.
New York department officials say in the opinion that they received a question about an insurance agent who wanted to do business with an employer association that was shutting down its multiple employer welfare arrangement (MEWA) health insurance program and trying to help the members find other coverage.
The producer was thinking about paying the association a quarterly fee of $75 for each employee in the MEWA plan. In return, the association would invite the producer to meetings, mail information about the producer to employers, and call employers for the producer, officials say.
The $75 payments would be unlawful payments of commissions to an unlicensed person, officials say.
New York Insurance Law Section 2114 allows for referral fees to be paid to an unlicensed person.
"The threshold issue is whether and to what extent a producer may provide compensation to a group policyholder of a policy sold by the producer," officials say. "If a group policyholder engages in any activities that would constitute acting as an insurance producer without a license, the group policyholder is in violation of Insurance Law Section 2102, unless an exception applies. Likewise, if the producer compensates the group policyholder for activities."
In the example described by the member of the public, "the group policyholder would receive compensation based upon the number of certificate holders under the group policy," and that would keep some exceptions in the insurance law that allow for referrals from applying, officials say.
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