What's happening
Writing a plain-English summary… Track this bill to get it by email.
Why it matters
Albany, before your first meeting.
Every bill that moved yesterday, summarized in a sentence and ranked by impact. The Albany Scorecard follows on Sundays.
Free. Unsubscribe in one click. Want alerts on specific bills? Create an account.
Who cares
Headline styles
Sponsors
No co-sponsors yet.
History
- Referred to insurance
Full text
The text isn't available here yet. Check nysenate.gov.
Sponsor's memo
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.
Read the full memo (716 words)
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.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.