Update Insurance Agent Rules

*Section 1 would amend Ins. L. § 1501(d) to deem an authorized foreign life insurer domiciled in New York as a domestic insurer.

*Section 2 would amend Ins. L. § 1502(a) to clarify that domestic insurers shall not be deemed a holding company, except insurers deemed to be domestic insurers pursuant to amended subsection d of Ins. L. section 1501.

*Section 3 would amend Ins. L. section 1506(a) to prohibit any person, other than a domestic insurer not deemed a domestic insurer pursuant to amended subsection d of Ins. L. section 1501 from acquiring control of any domestic insurer.

*Section 4 would amend Ins. L. section 1603(a) to make a technical correction to require the DFS' approval for all acquisitions of other companies made by domestic insurers.

*Section 5 would provide that the bill take effect immediately.

Part B of the proposal would amend the Ins. L. with regard to the NARAB and to make other technical amendments to the Ins. L. and Tax Law.

*Section 1 would amend Ins. L. § 110 to allow the DFS to share confidential information with and receive confidential information from NARAB.

*Section 2 would amend Ins. L. § 2101(a)(2) to make technical amendments to an exception from the definition of "insurance agent."

*Section 3 would amend Ins. L. § 2101(g)(1)(C), (D), and (E) to make technical amendments to the exceptions from the definition of "independent adjuster."

*Section 4 would amend Ins. L. § 2101(1) to remove unnecessary references to the "District of Columbia" and "territory of the United States" from the definition of "home state" and would add definitions of "principal place of business and "principal place of residence" for the purpose of the definition of "home state." Section 4 also would amend Ins. L. §§ 2101(m), (n), and (o) by removing "licensed", amend Ins. L. § 2101(w) to insert "commonwealth" in the definition of "state", and add a new Ins. L. § 2101(z), which would define "national association."

*Section 5 would amend Ins. L. § 2101(r) by renumbering paragraphs (6) and (7) as paragraphs (7) and (8), inserting a new paragraph (6), which would add mortgage guaranty to the definition of "line of authority", and to make clear in paragraph (8) that "line of authority" may include any other kind of insurance or sub-class of a kind of insurance set forth in a regulation promulgated by, and at the discretion of, the Superintendent.

*Section 6 would amend Ins. L. § 2103(a) to permit the Superintendent to issue an insurance agent's license for credit insurance as provided under Ins. L. section 2101(r)(6)(A), and would amend Ins. L. § 2103(b) to permit the Superintendent to issue an insurance agent's license for credit insurance as provided under Ins. L. § 2101(r)(6)(B) and for crop insurance.

*Section 7 would amend Ins. L. § 2103(f)(2) to permit an applicant for an accident and health or sickness, property, casualty, or personal lines insurance agent license to take the pre-licensing course outside of the classroom, such as online. Section 7 also would make technical amendments to Ins. L. § 2103(0(2).

*Section 8 would amend Ins. L. § 2103(g) by not requiring a written examination as a prerequisite to the issuance of a travel insurance agent's license to any ticket selling agent or representative of a railroad company, steamship company, carrier by air, public bus carrier, or other common carrier who acts as an insurance agent only in reference to insurance coverage for trip cancellation, trip interruption, baggage, accident and health, disability, and personal effects, when limited to a specific trip and sold in connection with transportation provided by the common carrier. Section 8 also would amend Ins. L. §§ 2103(g)(9) and (10) to update references to certain professional designations and to give the Superintendent discretion via a regulation to determine which other professional designations, if held, would exempt an individual seeking to be named a licensee or sublicensee from all or any part of the insurance agent pre-licensing, written exam or prerequisite pre-licensing course as set forth in either Ins. L. §§ 2103(f)(2)(A) or (B).

*Section 9 would amend Ins. L. § 2103(j)(9) to increase the insurance agent licensing fee from $40 to $45 for each year or fraction of a year that a license is valid, and would repeal Ins. L. § 2103(j)(10), which requires that an application for the renewal of an insurance agent license be filed with the Superintendent not less than 60 days prior to the date the license expires or the applicant will be subject to a $10 late filing fee.

*Section 10 would amend Ins. L. §§ 2104(c)(1)(A), (B), and (C), which apply to insurance broker licensing.

*Section 11 would amend Ins. L. § 2104(e)(1)(B) to update references to certain professional designations and to give the Superintendent discretion via regulation to determine which other professional designations, if held, would exempt an individual seeking to be named a licensee or sublicensee from all or part of the insurance broker pre-licensing, written exam or prerequisite course as set forth in Ins. L. § 2104(c)(1)(A).

*Section 12 would amend Ins. L. § 2104(f)(1) to increase the insurance broker licensing fee from $40 to $45 for each year or fraction of a year that a license is valid, and would repeal Ins. L. § 2104(g)(2), which requires that an application for the renewal of an insurance broker license be filed with the Superintendent not less than 60 days prior to the date the license expires or the applicant will be subject to a $10 late filing fee.

*Section 13 would amend Ins. L. § 2107(a)(1), which applies to the issuance of an insurance consultant's license, to make technical amendments.

*Section 14 would amend Ins. L. § 2107(c)(2) to update references to certain professional designations.

*Section 15 would amend Ins. L. § 2110 to allow the Superintendent to revoke or suspend a course provider's authorization and to make technical amendments.

*Section 16 would amend Ins. L. § 2132(b) to exempt from New York continuing education requirements an insurance producer who is a member of NARAB, provided the insurance producer complies with the continuing education requirements of the insurance producer's home state and NARAB.

*Section 17 would repeal Ins. L. § 2132(i), which applies to continuing education course providers.

*Section 18 would delete the language in Ins. L. § 2137(d)(2) that applies to fingerprinting of life settlement brokers.

*Section 19 would amend Ins. L. § 2137(f)(1)(D) to update references to certain professional designations and to give the Superintendent discretion via a regulation to determine which other professional designations, if held, would exempt an individual seeking to be named a licensee or sublicensee from all or part of the life settlement broker pre-licensing, written exam or prerequisite course as set forth in Ins. L. section 2137(e).

*Section 20 would add a new Ins. L. § 2140, which would require generally any individual named in an application for a license under Ins. L. Article 21 or 68 to submit a set of fingerprints.

*Section 21 would add a new Ins. L. § 2141, which would apply to pre-licensing and continuing education course providers.

*Section 22 would add a new Ins. L. § 2142 regarding membership in NARAB.

*Section 23 would repeal Ins. L. § 6505, which applies to the licensing of mortgage guaranty agents.

*Section 24 would amend Ins. L. § 7803(d) to remove a reference to the Education Law and to require the Superintendent to inform an applicant that he or she may obtain a copy of his or her criminal history record maintained by the Division of Criminal Justice Services, if any, and may challenge the completeness or accuracy of the information contained in the record.

*Section 25 would amend Ins. L. § 7804(f) in a manner similar to the amendment to Ins. L. section 7803(d).

*Section 26 would amend Ins. L. § 2118(d)(1), which applies to excess line brokers, to state that where the insurance covers property or risks located or resident both in and outside of the United States and the insured's home state is New York, the sum payable shall be computed on that portion of the gross premiums allocated to the risks located or resident in the United States pursuant to Ins. L. section

9102(b) less the amount of gross premiums allocated to the risks located or resident in the United States and returned to the insured.

*Section 27 would amend Ins. L. § 9102, which applies to allocation of premiums, by inserting language that sets forth how a person must determine the amount gross premiums taxable in New York where a placement of excess line insurance covers property or risks located or resident both in the United States and outside the United States and the insured's home state of New York.

*Section 28 would amend Tax Law § 1552, which applies to the allocation of premiums with regard to the tax on independently procured insurance, by adding language that states that where the insurance covers property or risks located or resident both in and outside of the United States and the taxpayer's home state is New York, the sum payable must be computed on that portion of the gross premiums allocated to the risks located or resident in the United States less the amount of gross premiums allocated to the risks located or resident in the United States and returned to the insured. The amount of premiums allocable to risks resident or located within the United States must be determined in a manner consistent with the rules and regulations promulgated by the Superintendent of Financial Services pursuant to Ins. L. § 9102(b).

Legislative history

None.

Justification

Part A: This proposal would authorize DFS to oversee authorized insurers not domiciled in New York that conduct a significant portion of their business in New York as well as certain insurance holding company transactions that are not currently subject to DFS review and approval. This bill would protect policyholders and the public from transactions that may undermine the solvency of an insurance company, or that would otherwise fail the fair and equitable standard in Article 15 of the Insurance Law. Moreover, the bill would also reduce incentives for a company to enter into a transaction that effectively constitutes a re-domestication to another state.

Part B: On January 12, 2015, President Obama signed into law a bill that established NARAB, an independent non-profit corporation that will act as a central clearinghouse. It allows an insurance producer who is a member of NARAB and who is licensed in his or her home state to sell, solicit or negotiate insurance in every other state in which the producer intends to do business, provided the producer is licensed for those lines of business in his or her home state and pays each state's licensing fee. Although NARAB preempts certain New York laws with respect to the authority to operate, it permits states to regulate the activities of its members in the same manner as New York licensees.

This bill would amend the Insurance Law to conform to NARAB. For example, this bill would add a new Ins. L. § 2142 to provide that a nonresident insurance producer that is a member of NARAB will be deemed an insurance producer for the purpose of the Insurance Law, upon payment of licensing fees set by New York. In addition, the bill would ensure that New York's producer licensing schematic is reciprocal and uniform with other states. This would create parity so that New York resident producers are not disadvantaged when compared to nonresident insurance producers who are NARAB members. This bill is also necessary because, without it, the Superintendent could not take action against any NARAB member that violates New York law and New York would not be able to collect licensing fees. In addition to amending the Insurance Law to align with NARAB, this bill also would add a new Ins. L. § 2140 to grant the Superintendent the authority to require an individual who is applying for any license pursuant to Article 21 of the Insurance Law, to submit his or her fingerprints. Currently, only insurance adjusters and life settlement brokers must be fingerprinted under Article 21 of the Insurance Law. This amendment would provide greater consumer protection by allowing the Superintendent to ascertain whether applicants are trustworthy by requiring them to submit their fingerprints so that a criminal history record check may be conducted.

This bill would also expand the discretionary exemptions set forth in Ins. L. §§ 2103(g)(9) and (10) and 2104(e)(1)(B) to "any other designation that the Superintendent determines is acceptable pursuant to a regulation" to reflect there are numerous comparable designations that DFS wishes to accommodate when the Superintendent deems them acceptable. The comparable designations are typically awarded after a person completes rigorous coursework and an examination. Also, the amount of hours required to complete one of these designations far exceeds the hours designated for pre-licensing education, and the subject matter of the coursework includes everything that a person needs to know to sit for a state licensing exam.

This bill also would clarify Ins. L. §§ 2101(m), (n) and (o), which set forth the definitions of "negotiate" or "negotiation", "sell" or "sale", and "solicit" or "solicitation", respectively. The bill would replace the term "licensed insurer" with the term "insurer" because these provisions define certain activity for all purposes regardless of whether that insurer is licensed by DFS. Read literally, a person would not be acting as an insurance agent or broker when soliciting, negotiating, or selling on behalf of an unauthorized insurer, which was not the intent.

The bill also would incorporate mortgage guaranty insurance agents under all of the provisions of Ins. L. Article 21. Currently, such agents get a lifetime license and pay a one-time licensing fee. However, all other Article 21 licensees have two-year license terms and pay renewal licensing fees. The lifetime mortgage guaranty insurance agent license appears to be an anomaly. Since mortgage guaranty insurance agents are licensed under Ins. L. Article 65, the terms of their licenses were not changed when the Legislature amended Ins. L. Article 21 to change the term of an insurance agent license to two-years. Moving mortgage guaranty insurance agents into Article 21 ensures that all of the requirements that apply to all other insurance agents will apply to mortgage guaranty insurance agents too.

Finally, Part I of Chapter 61 of the Laws of 2011 amended the Insurance Law and Tax Law to bring New York into conformance with the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, which contains the Nonadmitted and Reinsurance Reform Act. However, the amendments to the Insurance Law and Tax Law did not specifically address situations in which nonadmitted insurance contracts covers risks located both in the United States and outside the United States, for the purposes of premium tax allocation. In interpreting the law, DFS issued an insurance regulation that excess line brokers need not pay taxes on the premium attributable to such non-U.S. risks and the Tax Department interprets the Tax Law in a manner consonant with DFS's interpretation. This bill would amend Ins. L. §§ 2118(d) and 9102 and Tax Law § 1552 to expressly provide for premium tax allocation when such an insurance contract covers risks located both in the United States and outside the United States, which would reflect the current interpretation.

Fiscal implications

Part A: None. Part B: This bill will likely result in increased revenue for the State

Effective date

Part A: Immediately Part B: Various provisions take effect at different times.