New York State Regulations & NAIC Insurance Law
Licensing
Any individual applying for a New York resident producer’s license must be at least 18 years old and must be a resident of New York before submitting an application.
Pre-licensing course and exam
New York requires an approved prelicensing course of at least 20 hours for a life-only or an accident and health-only agent license, 40 hours for a combined life, accident and health license or a personal lines license, and 90 hours for a property and casualty license (N.Y. Dept. of Financial Services).
A candidate must score at least 70% to pass the New York insurance licensing examination (PSI, New York State Insurance Candidate Information Bulletin).
Fingerprints/background check
The Superintendent reviews an applicant’s background before issuing a license, and many states require applicants to submit fingerprints for a state and FBI criminal history check as part of the application.
Controlled business
Controlled business is insurance written on the producer’s own life, property or interests, or on those of the producer’s family, employer or a business the producer controls. A producer may insure themselves and their family, but a license exists to sell insurance to the public, so states generally restrict obtaining or using a license principally to write controlled business.
New York may refuse, suspend or revoke a license if more than 10% of the applicant’s net commissions over the preceding or coming 12 months come from insurance on the property and risks of the applicant’s spouse, a corporation the applicant controls, or similar closely related parties (N.Y. Ins. Law § 2103(i)). An agent or broker may keep the commission on insurance placed on the agent’s own property or risks only while those commissions stay within 5% of total net commissions for the year (N.Y. Ins. Law § 2324(a)).
Non-resident license
A producer licensed in another state can obtain a New York nonresident license without taking New York’s examination. Under the NAIC’s Producer Licensing Model Act, which most states have adopted in some form, a nonresident receives the license if the person:
- Is currently licensed as a resident, and in good standing, in the home state
- Has applied (the home-state application or the Uniform Application) and paid the fees
- Lives in a home state that grants nonresident licenses to residents of this state on the same basis (reciprocity)
Under the same model, a producer who moves to another state files a change of address, with certification from the new home state, within 30 days. A licensed producer who moves into a state applies for a resident license there within 90 days and does not repeat prelicensing education or the examination for lines already held.
Temporary license
Most states allow the insurance regulator to issue a temporary license, without an examination, when one is needed to keep an insurance business serviced. Typical cases are:
- The surviving spouse or personal representative of a producer who dies or becomes disabled, to allow time to sell the business or train new people
- A member or employee of a business entity producer, on the death or disability of its designated producer
- The designee of a producer entering active military service
The regulator may limit what a temporary licensee may do and may require a licensed sponsor who takes responsibility for the temporary licensee’s acts.
On the death of a licensed New York agent or broker, a temporary license to carry on the business may be issued for up to 90 days and renewed in 90-day terms, to no more than 15 months in all (N.Y. Ins. Law § 2109(e)).
Military service
When a New York licensee cannot apply personally for renewal because of military service, the Superintendent may accept an application filed on the licensee’s behalf by someone who knows the facts (N.Y. Ins. Law § 2103(j)(8)).
Renewal and reinstatement
A producer license stays in effect only while the producer renews it on schedule: paying the renewal fee and completing continuing education by the due date.
A New York individual license expires on the licensee’s birthday every two years (in odd-numbered years for someone born in an odd-numbered year, even-numbered years otherwise) and may be renewed for the next 24 months (N.Y. Ins. Law § 2103(j)(2)).
A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.
A former New York agent who applies again within two years after the license terminated does not have to retake the written examination (N.Y. Ins. Law § 2103(g)(7)).
Continuing education
All states, including New York, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Individuals licensed in the state of New York must complete continuing education prior to renewing their license. The number of hours required is set by state law and published by the state insurance department.
Notice of change of name or address
A New York licensee must inform the Superintendent of a change of address within 30 days of the change (N.Y. Ins. Law § 2134(a)).
The model also requires a producer to report to the regulator within 30 days any administrative action taken against the producer in another state or by another government agency, counted from the final disposition, and any criminal prosecution in any jurisdiction, counted from the initial pretrial hearing date. A producer who does business under any name other than their legal name must notify the regulator before using it.
Company regulations
An insurance company must be authorized by the Department of Financial Services to conduct business in New York. To receive a certificate of authority, the company applies to the Superintendent and files its charter or articles of incorporation, financial statements showing that it meets the state’s capital and surplus requirements, and the other documents and fees the state requires.
Capital and surplus requirement
A company authorized to conduct insurance business in New York must meet minimum corporate standards. The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required. In New York, the Superintendent orders an impaired domestic insurer to eliminate the impairment within no more than 90 days and may bar it from issuing new policies meanwhile (N.Y. Ins. Law § 1310(a)); an impaired foreign stock insurer may, after notice and hearing, be barred from issuing new policies or have its license revoked (§ 1310(b)).
Duties of the Superintendent of Financial Services
The New York Superintendent of Financial Services is a state executive position in the New York government. The Superintendent is the chief executive of the New York Department of Financial Services, which regulates insurance companies operating in New York. This position is appointed by the Governor and serves at the pleasure of the Governor. The appointment is made with the advice and consent of the Senate (N.Y. Fin. Serv. Law § 202(a)).
The Superintendent is responsible for establishing and enforcing regulations in the New York insurance market in a manner that protects consumers and encourages economic development. Their duties include:
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Investigate all claims and complaints of legal violations relating to insurance.
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If the Superintendent finds that laws have been violated, the findings and supporting documents may be referred for criminal prosecution.
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Monitor transactions of all companies including domestic, foreign, and alien insurance companies.
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Audit the books and records of any resident producer as frequently as necessary.
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Collect all fees associated with producers and insurers.
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Determine and administer fines associated with violations for insurers and producers.
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Issue reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers.
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Approve documentation used by insurance companies such as forms and rates.
Suspend, revoke or non-renew
The Superintendent has the authority to suspend, revoke, or refuse to renew a license for:
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Providing false information on the application for an insurance license.
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Omitting any relevant information on an application that would have disqualified the individual from being eligible to receive a license.
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Being found guilty of a violation or the noncompliance of insurance regulations and laws…
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Committing fraud while attempting to obtain an insurance license.
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Mingling funds received as an agent or broker with the producer’s own funds without the express consent of the principal (N.Y. Ins. Law § 2120(a)).
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Providing false information in reference to the terms and conditions of an insurance contract.
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Having been convicted of a felony.
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Having admitted or been found to have committed any insurance unfair trade practice or fraud.
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Having engaged in activities of a fraudulent nature which allowed the person to involve themselves in dishonest, coercive, untrustworthy, and financially irresponsible practices.
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Having had a prior insurance license revoked or suspended in a state other than New York.
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Using another person’s identity and forging their name on an insurance application.
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Being found guilty of using unethical practices or cheating on an examination for an insurance license.
Cease and desist
If the Superintendent finds that a producer has violated the state’s insurance laws, the Superintendent may order the producer to cease and desist. Receiving a cease and desist order does not mean the producer’s registration has been suspended or revoked, but it does require the producer to stop or limit the activity addressed in the order.
Hearing and penalties
A person facing action by the Superintendent is entitled to notice and an opportunity for a hearing, within time limits set by New York law, and may ask a court to review the final order. Under New York’s unfair practices law the hearing comes first: the Superintendent serves a statement of the charges and notice of a hearing held at least 10 days later, the order follows the hearing, and it becomes final only when the time for judicial review has passed (N.Y. Ins. Law §§ 2405(a), 2406).
Before revoking or suspending a producer’s license, the Superintendent must give the licensee notice and hold a hearing at least 10 days after the notice (N.Y. Ins. Law § 2110(b)).
A violation of the insurance laws can bring a civil penalty in addition to action against a license. State law sets the maximum, usually per violation and often with a cap on the total, and a higher tier commonly applies to a violation that was knowing or flagrant. Some violations are also crimes.
Instead of revoking or suspending a license, the Superintendent may order the licensee to pay a penalty of up to $500 for each offense, and up to $2,500 in all for the offenses in one proceeding (N.Y. Ins. Law § 2127(a)).
Unfair claims settlement practices
Under the NAIC’s model act, these practices are violations when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice.
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The intentional obstruction and delay of claims payment or the delay of a claims investigation is a violation of regulation.
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Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.
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Failure to provide claims without launching a thorough investigation is a violation of regulation.
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Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.
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Denying a claim without conducting a thorough investigation.
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Attempting to settle a claim for less than fair market value.
Policy forms
Insurers file their policy forms with the Superintendent.
A New York life, accident and health or annuity policy form may not be delivered until the Superintendent has approved it (N.Y. Ins. Law § 3201(b)(1)). A property and casualty form may be used once approved, or once 30 days have passed after filing without disapproval (N.Y. Ins. Law § 2307(b)).
If a policy provision conflicts with New York law, the policy is read as amended to conform to the law.
Record maintenance
A producer keeps records of each transaction (the policies placed, the insureds, the premiums received and any changes) and makes them available for the Superintendent’s inspection.
Fraudulent producer representation
An insurance producer who represents to the public that they are licensed to conduct insurance business in New York, but has not passed the appropriate licensing examination, is in violation of regulation. This includes any public communication, such as advertisements, letterheads, circulars, business cards, and other methods of representation.
A producer found guilty of conducting business in New York in any line of insurance for which they are not properly licensed may have any other insurance license suspended or revoked.
Misrepresentation
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Misrepresentation involving the creation or distribution of policies, quotes, and illustrations designed to provide inaccurate information about the terms and conditions of a policy is prohibited.
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Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.
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Providing inaccurate or incomplete information for the purpose of inducing, or tending to induce, the lapse, exchange, conversion, forfeiture, or surrender of a policy is a violation as well (twisting).
False advertising
Making, publishing or circulating an advertisement, announcement or statement about the business of insurance that is untrue, deceptive or misleading is an unfair trade practice under state law, based on the NAIC’s model act. The medium does not matter: the rule reaches newspapers, magazines, radio and television, and also notices, circulars, pamphlets, letters, posters and any other way of placing the statement before the public. The model act’s test is whether the statement is untrue, deceptive or misleading, not whether the person meant to deceive.
Defamation
Defamation of an insurer is an unfair trade practice under state law, based on the NAIC’s model act: making, publishing or circulating an oral or written statement that is false, or maliciously critical of or derogatory to the financial condition of an insurer, and that is calculated to injure that insurer or any other person engaged in the business of insurance. New York’s own rule reaches a person who wilfully makes, circulates or transmits a statement that is untrue in fact and directly or by inference derogatory to the financial condition of any insurer doing business in the state (N.Y. Ins. Law § 2604). Spreading an untrue rumor that a competing insurer is about to fail is the classic example.
Boycott, coercion and intimidation
Entering into an agreement to commit, or by concerted action committing, any act of boycott, coercion or intimidation that results or tends to result in unreasonable restraint of, or monopoly in, the business of insurance is prohibited.
False financial statements
Any licensed producer who makes false statements containing inaccurate material facts, or makes false statements on an application for insurance, is in violation of the state’s unfair trade practices law.
Illegal inducements
Offering anything of value not specified in the policy (money, a service, a favor or a gift) as an inducement to buy insurance is prohibited unless state law expressly allows it, and any agreement made as part of the sale must be written into the policy.
No New York insurer, agent or broker may make a contract of insurance other than as plainly expressed in the policy, or pay or allow the insured, directly or indirectly, any rebate of the premium as an inducement to insure (N.Y. Ins. Law § 2324(a)).
New York’s rebating law exempts merchandise, periodical subscriptions or other valuable consideration worth no more than $25 (N.Y. Ins. Law § 2324(a)).
Unfair discrimination
Unfair discrimination is treating people or risks that present the same hazard differently. The NAIC’s model act, on which state unfair trade practices laws are based, prohibits:
- Unfair discrimination between individuals of the same class and equal expectation of life in life insurance and annuity rates, dividends, benefits or terms
- Unfair discrimination between individuals of the same class and essentially the same hazard in health insurance premiums, benefits or terms
- Refusing, limiting or canceling coverage because of a person’s sex, marital status, race, religion or national origin
- In property and casualty insurance, refusing or limiting coverage solely because of a risk’s geographic location, unless sound underwriting and actuarial principles justify it, or solely because the applicant or insured is physically or mentally impaired
Many states also expressly forbid refusing or limiting coverage solely because a person is blind or partially blind.
Errors & Omissions
Errors & Omissions (E&O) insurance is a type of professional liability insurance that protects insurance agents if they are sued for negligent performance of their duties. E&O covers only honest mistakes that result in (financial) damage to customers/prospects. There is no coverage for violations of insurance regulation.
Rebating
New York licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.
Sharing commission
Splitting or sharing commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split. Under the NAIC’s model act, a commission may also be paid to an insurance agency, or to a person who does not sell, solicit or negotiate insurance. New York is narrower: a commission for placing life insurance or an annuity may be paid only to a licensed life insurance agent of the insurer or a licensed broker (N.Y. Ins. Law § 2114(a)), and one for other insurance only to a licensed agent of the insurer or the others the law names (§ 2115(a)). Referring someone to a licensed agent or broker without discussing policy terms, for pay not based on the purchase, is not acting as an agent.
Twisting
Providing false information or expressing derogatory ideas about the financial conditions of a competitor company with the intent to lapse or surrender an existing policy is a violation of the law. Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information are prohibited.
Under the NAIC’s model act, twisting is a misrepresentation made to induce a policyholder to lapse, forfeit, surrender, exchange or convert a policy. A false or maliciously critical statement about a competing insurer’s finances, made to injure it, is defamation.
Unfair marketing practices
The Department of Financial Services is responsible for establishing minimum standards for full and fair disclosure of policy content. The Department also requires standardization and simplification of the terms used to describe insurance coverage. Advertising may not involve the following:
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Any statement or implication that policies are approved, or that the financial condition of a company is endorsed, by any government agency or by any independent group, individual, organization or society, unless that is the fact.
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Any statements regarding advertising that are false or untrue in reference to the time frame in which claims are paid.
Gramm-Leach Bliley Act (GLBA)
This law repealed the Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies. GLBA established a framework of responsibilities for federal and state regulators across these financial industries. It permits financial services companies to merge and engage in a variety of new business activities, including insurance, while attempting to address the regulatory issues raised by such combinations.
McCarran-Ferguson Act
Federal law signed in 1945 in which Congress declared that the insurance industry would be regulated at the state level. Grants insurers a limited exemption from federal antitrust legislation. Since 2021 the exemption does not cover the business of health insurance, apart from narrow activities such as sharing historical loss data (15 U.S.C. § 1013©).
National Association of Insurance Commissioners (NAIC)
The U.S. standard-setting and regulatory support organization is created and governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA, 15 U.S.C. 1681) regulates consumer reporting agencies and the use of consumer reports, such as credit reports, MIB records and investigative reports, including in insurance underwriting.
- When an insurer requests an investigative consumer report, it must disclose that to the consumer within 3 days of the request
- When an insurer takes adverse action based on a consumer report, it must notify the consumer and identify the reporting agency. The consumer then has 60 days to request a free copy of the report and may dispute inaccurate information
Privacy Act of 1974
The federal Privacy Act of 1974 governs how federal agencies handle personal information. It does not apply to private insurers. An insurer’s use of an applicant’s personal information is governed by the FCRA, the Gramm-Leach-Bliley Act and state insurance privacy law.
In states that adopted the NAIC’s Insurance Information and Privacy Protection Model Act, an authorization to collect personal information signed with an application is valid for no more than 30 months for life, health or disability insurance and one year for property or casualty insurance.
Telemarketing
The National Do Not Call Registry is a list of telephone numbers whose owners do not want to receive telemarketing calls. Telemarketers may not call registered numbers without the person’s permission or an established business relationship, and unsolicited sales calls:
- May be made only between 8 a.m. and 9 p.m. in the recipient’s local time
- Must disclose the caller’s identity, the company the caller represents and that the purpose is a sale
CAN-SPAM
A commercial email must:
- Be identified clearly as an advertisement
- Carry accurate header information and a subject line that is not deceptive
- Include the sender’s valid physical postal address
- Offer a way to opt out, and the sender must honor an opt-out within 10 business days
Insurance guaranty association
Every state has a property and casualty insurance guaranty association that pays covered claims when a member insurer becomes insolvent. Insurers licensed to write the covered lines in the state must belong to it, and it is funded by assessments on its members.
New York pays the claims of an insolvent property and casualty insurer from the Property/Casualty Insurance Security Fund, which pays no more than $1,000,000 on any one claim (N.Y. Ins. Law § 7603(a)(2)).
Auto insurance state minimum
A state’s financial responsibility law sets the minimum liability an auto policy must carry, written as a split limit: the first number is bodily injury liability per person, the second bodily injury liability per accident, and the third property damage liability per accident, each in thousands of dollars.
New York’s minimum auto liability limits are $25,000 for bodily injury to one person ($50,000 for death), $50,000 for bodily injury to two or more people in one accident ($100,000 for death), and $10,000 for property damage (N.Y. Veh. & Traf. Law § 311(4)(a)).