NY State Senate Bill 2015-S7661

Senate Bill S7661

2015-2016 Legislative Session

Relates to prohibitions on rebating and discrimination in rates and payments under insurance policies

download bill text pdf

Archive: Last Bill Status - In Senate Committee Insurance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
May 12, 2016	referred to insurance

2015-S7661 (ACTIVE) - Details

Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§2324 & 4224, Ins L
Versions Introduced in Other Legislative Sessions:: 2017-2018: S2302
2019-2020: S3524
2021-2022: S3771
2023-2024: S2795

2015-S7661 (ACTIVE) - Summary

Relates to prohibitions on rebating and discrimination in rates and payments under insurance policies; provides that certain services shall not be considered to be an inducement or rebate unless the superintendent determines that the offer and sale of such services constituted the sole reason for the purchase of such insurance policy.

2015-S7661 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S7661

 TITLE OF BILL :  An act to amend the insurance law, in relation to
prohibitions on rebating and discrimination

 PURPOSE :

To modernize the anti-rebating statutes of the Insurance Law, by
adding a provision to each statute which requires the imposition of a
quid pro quo standard as necessary for the Superintendent to find that
a violation of those statute's prohibitions have occurred.

 SUMMARY OF PROVISIONS :

Sections 1 and 2 of the bill amend sections 2324(g) and 4224(c) of the
insurance law to provide that services offered or delivered as part of
the sale or renewal of an insurance policy, contract or group
insurance policy shall not be considered to be an inducement or rebate
when the offer and sale of such services does not constitute the sole
reason for the purchase of such insurance policy, contract or group
insurance policy such services shall not be considered to be an
inducement or rebate prohibited by this section unless the
Superintendent determines, after a notice and hearing, that the offer
and sale of such services constituted the sole reason for the purchase
of such insurance policy, contract or group insurance policy and that,
but for the offer or delivery of such service, the purchase of such

policy or contract would not have taken place.

Section 3 is the effective date.

 JUSTIFICATION :

Sections 2324 and 4224 prohibit "rebating" and "inducements" being
used in the sale of an insurance policy. This situation occurs when an
insurance agent or company offers to return all or a portion of the
premium paid by an insured for a policy directly back to that insured
for the sole purpose of "inducing" that insured to buy the policy in
the first place. Thus, the returned premium is "rebated" to the
insured.

The anti-rebating provisions have their origin in the historically
significant investigation conducted by the New York Legislature in
1905 known as the "Armstrong Commission". That commission conducted a
comprehensive investigation of allegations concerning extravagant
spending and political payoffs by the Equitable Life Assurance Society
which were undertaken at the expense of the company's policyholders.
The Armstrong Commission found a number of abuses including
interlocking directorates, the creation of subsidiary financial
institutions to evade investment restrictions, the use of proxy voting
to frustrate policyholder control of mutual, unlimited company
expenses, tremendous spending for lobbying activities, and rebating.

The Armstrong Commission recommended changes to the insurance law
which were enacted in the 1907 session, including the prohibition of
rebating.

The insurance business has changed significantly since those original
anti-rebating provisions were enacted. Some companies have sought
legislative exemptions for services offered to insureds in order to
ensure that the service does not run afoul of the anti-rebating
statutes. In addition, the Department of Financial Services has sought
to administratively expand the list of services which companies and
producers wish to offer their insured's in conjunction with the
policy, and have labeled such services, "rebates". The DFS has created
an ever-expanding list of goods and services which violates the
anti-rebating provisions. (See DFS circular letter No.  22, 2009) As a
result, a great deal of confusion exists in the insurer, producer and
insurance consumer communities as to exactly which services may or may
not be offered with the policy.

A need has arisen to create a clear standard with which all parties
may use to ensure compliance with the law and also which allows
insurers and producers to convey value to insureds along with the
insurance policy, while returning to the original intent and purpose
of the anti-rebating statutes.

This legislation imposes a standard for services offered by insurance
companies and producers which requires that in order to show a
violation, the Superintendent must show through evidence at a hearing
that the offered service was the sole reason for the sale of the
policy and that such sale would not have taken place without the
offered service. This standard will restore the original intent of the
statute to prevent insurance sales made solely to obtain the service
while allowing the provision of valuable services to insureds which
happen to come along with the purchase of their insurance policies.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
The bill will take effect 60 days after it is signed.

2015-S7661 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  7661

                            I N  S E N A T E

                              May 12, 2016
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

AN ACT to amend the insurance law, in relation to prohibitions on rebat-
  ing and discrimination

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Section  2324 of the insurance law is amended by adding a
new subsection (g) to read as follows:
  (G) NOTWITHSTANDING THE PROVISIONS OF SUBSECTION (A) OF THIS  SECTION,
ANY  SERVICES  PROVIDED,  OR  OFFERED  TO  BE PROVIDED, BY AN AUTHORIZED
INSURER, LICENSED INSURANCE  AGENT,  LICENSED  INSURANCE  BROKER  OR  AN
EMPLOYEE  OR  OTHER  REPRESENTATIVE  OF  ANY  SUCH  AUTHORIZED  INSURER,
LICENSED INSURANCE AGENT OR LICENSED  INSURANCE  BROKER;  PROVIDED  THAT
SUCH SERVICES ARE OFFERED OR DELIVERED AS PART OF THE SALE OR RENEWAL OF
AN  INSURANCE  POLICY, CONTRACT OR GROUP INSURANCE POLICY AND OFFERED OR
DELIVERED IN A  NON-DISCRIMINATORY  MANNER  TO  ALL  SIMILARLY  SITUATED
INSUREDS  OR POTENTIAL INSUREDS, WHETHER OR NOT SUCH SERVICES ARE SPECI-
FIED IN SUCH POLICY OR CONTRACT;  SHALL  NOT  BE  CONSIDERED  TO  BE  AN
INDUCEMENT  OR  REBATE PROHIBITED BY THIS SECTION UNLESS THE SUPERINTEN-
DENT DETERMINES, AFTER A NOTICE AND HEARING, THAT THE OFFER AND SALE  OF
SUCH  SERVICES  CONSTITUTED  THE  SOLE  REASON  FOR THE PURCHASE OF SUCH
INSURANCE POLICY, CONTRACT OR GROUP INSURANCE POLICY AND THAT,  BUT  FOR
THE  OFFER  OR  DELIVERY OR SUCH SERVICE, THE PURCHASE OF SUCH POLICY OR
CONTRACT WOULD NOT HAVE TAKEN PLACE.
  S 2. Subsection (c) of section 4224 of the insurance law,  as  amended
by chapter 496 of the laws of 2013, is amended to read as follows:
  (c)  (1)  Except  as  permitted  by section three thousand two hundred
thirty-nine of this chapter or subsection (f) of this section,  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,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD15348-01-6

S. 7661                             2

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 insur-
ance, 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 other  than
any  valuable consideration, including but not limited to merchandise or
periodical subscriptions, not exceeding twenty-five  dollars  in  value;
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 what-
ever which is not specified in such policy or contract.
  (2)  NOTWITHSTANDING  THE  PROVISIONS  OF  PARAGRAPH   ONE   OF   THIS
SUBSECTION,  ANY SERVICES PROVIDED, OR OFFERED TO BE PROVIDED, BY A LIFE
INSURANCE COMPANY OR ANY OFFICER,  AGENT,  SOLICITOR  OR  REPRESENTATIVE
THEREOF,  BY AN INSURER DOING IN THIS STATE THE BUSINESS OF ACCIDENT AND
HEALTH INSURANCE OR AN OFFICER, AGENT, SOLICITOR OR REPRESENTATIVE THER-
EOF, OR BY A LICENSED INSURANCE BROKER, AN EMPLOYEE OR  OTHER  REPRESEN-
TATIVE  OF  ANY  SUCH,  INSURER,  AGENT  OR  BROKER;  PROVIDED THAT SUCH
SERVICES ARE OFFERED OR DELIVERED AS PART OF THE SALE OR RENEWAL  OF  AN
INSURANCE  POLICY,  CONTRACT  OR  GROUP  INSURANCE POLICY AND OFFERED OR
DELIVERED IN A  NON-DISCRIMINATORY  MANNER  TO  ALL  SIMILARLY  SITUATED
INSUREDS  OR POTENTIAL INSUREDS, WHETHER OR NOT SUCH SERVICES ARE SPECI-
FIED IN SUCH POLICY OR CONTRACT,  SHALL  NOT  BE  CONSIDERED  TO  BE  AN
INDUCEMENT  OR  REBATE PROHIBITED BY THIS SECTION UNLESS THE SUPERINTEN-
DENT DETERMINES, AFTER A NOTICE AND HEARING, THAT THE OFFER AND SALE  OF
SUCH  SERVICES  CONSTITUTED  THE  SOLE  REASON  FOR THE PURCHASE OF SUCH
INSURANCE POLICY, CONTRACT OR GROUP INSURANCE POLICY AND THAT,  BUT  FOR
THE  OFFER  OR  DELIVERY OF SUCH SERVICE, THE PURCHASE OF SUCH POLICY OR
CONTRACT WOULD NOT HAVE TAKEN PLACE.
  S 3. This act shall take effect on the sixtieth  day  after  it  shall
have become a law.

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