senate Bill S3539A

Signed by Governor

Permits certain agreements by domestic mutual insurance corporations

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor
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actions

  • 05 / Feb / 2013
    • REFERRED TO INSURANCE
  • 11 / Feb / 2013
    • 1ST REPORT CAL.56
  • 12 / Feb / 2013
    • 2ND REPORT CAL.
  • 27 / Feb / 2013
    • ADVANCED TO THIRD READING
  • 18 / Mar / 2013
    • PASSED SENATE
  • 18 / Mar / 2013
    • DELIVERED TO ASSEMBLY
  • 18 / Mar / 2013
    • REFERRED TO INSURANCE
  • 08 / Jan / 2014
    • DIED IN ASSEMBLY
  • 08 / Jan / 2014
    • RETURNED TO SENATE
  • 08 / Jan / 2014
    • REFERRED TO INSURANCE
  • 05 / May / 2014
    • 1ST REPORT CAL.490
  • 06 / May / 2014
    • 2ND REPORT CAL.
  • 07 / May / 2014
    • ADVANCED TO THIRD READING
  • 10 / Jun / 2014
    • AMENDED ON THIRD READING 3539A
  • 17 / Jun / 2014
    • PASSED SENATE
  • 17 / Jun / 2014
    • DELIVERED TO ASSEMBLY
  • 17 / Jun / 2014
    • REFERRED TO INSURANCE
  • 19 / Jun / 2014
    • SUBSTITUTED FOR A4833A
  • 19 / Jun / 2014
    • ORDERED TO THIRD READING RULES CAL.438
  • 19 / Jun / 2014
    • PASSED ASSEMBLY
  • 19 / Jun / 2014
    • RETURNED TO SENATE
  • 09 / Oct / 2014
    • DELIVERED TO GOVERNOR
  • 21 / Oct / 2014
    • SIGNED CHAP.410

Summary

Permits certain agreements by domestic mutual insurance corporations.

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Bill Details

See Assembly Version of this Bill:
A4833A
Versions:
S3539
S3539A
Legislative Cycle:
2013-2014
Law Section:
Insurance Law
Laws Affected:
Amd ยง1209, Ins L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S2875
2009-2010: S7794A

Sponsor Memo

BILL NUMBER:S3539A

TITLE OF BILL: An act to amend the insurance law, in relation to
permitting certain agreements by domestic mutual insurance
corporations

PURPOSE: To permit domestic mutual insurance corporations to enter
into certain compensation agreements with firms and corporations in
which an officer or director has only an "indirect" pecuniary
interest.

SUMMARY OF PROVISIONS: Section 1: Amends Insurance Law Section 1209(f)
that upon application be a domestic mutual insurance corporation, the
superintendent may permit the insurance corporation to enter into such
agreement with a firm or corporation that is a licensed producer if
the superintendent determines that (1) the insurance corporation's
policyholders will not be adversely affected, (2) the officer or
director has no pecuniary interest directly in the insurance producer,
and (3) any benefit to the officer or director that accrues as a
result of the agreement would not be material in relation to the
insurance corporation's overall premium volume. It also requires the
superintendent to review these agreements annually and gives him or
her the power to revoke approval if the agreements no longer conform
with the requirements in this section.

Section 2: Effective date.

EXISTING LAW: Existing law prohibits domestic mutual insurance
companies (except those organized before January 1, 1940 to do only
marine protection and indemnity insurance) from entering into an
agreement with any of the company's officers or directors, or with any
firm or corporation in which any such officer or director is
pecuniarily interested directly or indirectly, whereby the insurance
corporation agrees to pay, for the acquisition of business, any
commission or other compensation which under the agreement is
increased or diminished by the amount of such business or by the
insurance corporation's earnings on such business.

The Insurance Department has interpreted this law as prohibiting a
mutual insurance company from entering into a profit sharing
commission agreement with an insurance agency simply because one of
the insurance company's officers also served as a director of a
corporation that owned the insurance agency. The Insurance Department
found that the insurance company officer had an "indirect" pecuniary
interest in the insurance agency.

JUSTIFICATION: The existing prohibition is an outdated and overly
restrictive limitation put in place nearly a century ago. It serves no
legitimate purpose today and is no longer practical in today's
business environment. In today's business community, many directors
and officers of insurance companies also serve on the board of
directors of various other, non-insurance business corporations.
Today, many corporations are part of a larger holding company
structure, and it is quite possible that a corporation where an
insurance company officer serves as director would have affiliates or
subsidiaries that engage in insurance activities. This provision
unnecessarily prohibits a mutual insurance company from entering into


certain compensation agreements with these insurance agency affiliates
and discourages mutual insurance company officers and directors from
sharing their talents and serving as directors and officers of various
other corporations.

LEGISLATIVE HISTORY: S.2875 of 2011-12; S.7794 of 2010

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately

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

                                 3539--A
    Cal. No. 490

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            February 5, 2013
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance  --  recommitted
  to the Committee on Insurance in accordance with Senate Rule 6, sec. 8
  -- reported favorably from said committee, ordered to first and second
  report,  ordered  to  a  third reading, amended and ordered reprinted,
  retaining its place in the order of third reading

AN ACT to amend the insurance law, in  relation  to  permitting  certain
  agreements by domestic mutual insurance corporations

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

  Section 1. Subsection (f) of section 1209  of  the  insurance  law  is
amended to read as follows:
  (f) No domestic mutual insurance corporation, except a domestic mutual
insurance company organized before January first, nineteen hundred forty
to  do  only marine protection and indemnity insurance, shall enter into
any agreement with any of the officers or directors, or with any firm or
corporation in which any such officer or director is pecuniarily  inter-
ested  directly  or indirectly, whereby the insurance corporation agrees
to pay, for the acquisition of business, any commission or other compen-
sation which under the agreement  is  increased  or  diminished  by  the
amount  of  such  business or by the insurance corporation's earnings on
such business. NOTWITHSTANDING THE FOREGOING, AND UPON APPLICATION BY  A
DOMESTIC MUTUAL INSURANCE CORPORATION, THE SUPERINTENDENT MAY PERMIT THE
INSURANCE  CORPORATION  TO  ENTER  INTO SUCH AN AGREEMENT WITH A FIRM OR
CORPORATION THAT IS A LICENSED INSURANCE PRODUCER IF THE  SUPERINTENDENT
DETERMINES  THAT: (1) THE INSURANCE CORPORATION'S POLICYHOLDERS WILL NOT
BE ADVERSELY AFFECTED; (2) THE OFFICER  OR  DIRECTOR  HAS  NO  PECUNIARY
INTEREST  DIRECTLY IN THE INSURANCE PRODUCER; AND (3) ANY BENEFIT TO THE
OFFICER OR DIRECTOR THAT ACCRUES AS A RESULT OF THE AGREEMENT WOULD  NOT
BE  MATERIAL  IN RELATION TO THE INSURANCE CORPORATION'S OVERALL PREMIUM
VOLUME.   ANY SUCH AGREEMENT APPROVED BY  THE  SUPERINTENDENT  SHALL  BE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD08131-03-4

S. 3539--A                          2

SUBJECT  TO ANNUAL REVIEWS AND, WHERE THE SUPERINTENDENT DETERMINES SUCH
AGREEMENT NO LONGER CONFORMS  TO  THIS  SUBSECTION,  THE  SUPERINTENDENT
SHALL REVOKE HIS OR HER PRIOR APPROVAL.
  S 2. This act shall take effect immediately.

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