What's happening
This bill allows insurance companies to offer certain services as policy incentives without being considered illegal rebates, if offered fairly.
Why it matters
Allows insurance companies to offer extra services (like wellness programs, financial planning, or similar) as incentives for buying or renewing policies, provided these are made available equally to all similar customers. This could result in more value-added benefits for policyholders.
Clarifies that these services won’t be considered illegal rebates unless the only reason someone buys the insurance is to get the extra service. This protects consumers from being misled but gives insurers flexibility to innovate in their offerings.
Requires that if regulators suspect abuse (i.e., the service is the sole reason for the purchase), a formal review process with notice and hearing must occur before any penalties. This ensures due process for insurance companies and brokers.
May lead to increased competition among insurers, potentially benefiting consumers through improved services and more attractive policy features, while maintaining oversight against unfair or discriminatory practices.
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Who cares
Headline styles
Ban Insurance Rate Discrimination
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to insurance
- Referred to insurance
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2302
2017-2018 Regular Sessions
IN SENATE
January 12, 2017
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 rebating and discrimination
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. 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, 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 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
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04879-02-7
S. 2302 2
services of any kind, or any valuable consideration or inducement whatever 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, or by an insurer doing in this state the business of accident and health insurance and an officer, agent, solicitor or representative thereof, or by a licensed insurance broker, an employee or other representative 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 specified in such policy or contract, 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.
§ 2. This act shall take effect on the sixtieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
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
Section 1 of the bill amends section 4224(c) of the insurance law to provide that services offered or delivered as part of the sale or renewal of a life 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 life 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 life 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 (722 words)
Section 2 is the effective date.
Justification
Section 4224 prohibits "rebating" and "inducements" being used in the sale of an insurance policy. This situation occurs when a life insurance agent or life insurance 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 life 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 life 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 life 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
Similar to S7661 of 2016.
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.