senate Bill S2875

2011-2012 Legislative Session

Permits certain agreements by domestic mutual insurance corporations

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Archive: Last Bill Status - Passed Senate


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Feb 07, 2012 referred to insurance
delivered to assembly
passed senate
Feb 06, 2012 advanced to third reading
Jan 31, 2012 2nd report cal.
Jan 30, 2012 1st report cal.133
Jan 04, 2012 referred to insurance
returned to senate
died in assembly
Jun 07, 2011 referred to insurance
delivered to assembly
passed senate
Mar 23, 2011 advanced to third reading
Mar 22, 2011 2nd report cal.
Mar 21, 2011 1st report cal.240
Feb 02, 2011 referred to insurance

Votes

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Jan 30, 2012 - Insurance committee Vote

S2875
17
1
committee
17
Aye
1
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show Insurance committee vote details

Mar 21, 2011 - Insurance committee Vote

S2875
16
1
committee
16
Aye
1
Nay
1
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show Insurance committee vote details

Insurance Committee Vote: Mar 21, 2011

nay (1)
aye wr (1)

S2875 - Bill Details

See Assembly Version of this Bill:
A6788
Current Committee:
Law Section:
Insurance Law
Laws Affected:
Amd ยง1209, Ins L
Versions Introduced in 2009-2010 Legislative Session:
S7794A, A11340A

S2875 - Bill Texts

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Permits certain agreements by domestic mutual insurance corporations.

view sponsor memo
BILL NUMBER:S2875

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.

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 selves 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.7794 of 2010

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

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

                                  2875

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            February 2, 2011
                               ___________

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  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.
  S 2. This act shall take effect immediately.


 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD08907-01-1

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