BILL NUMBER: S5668

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law, in relation to improving insurance
consumer servicing options for New York residents

 
PURPOSE:

To modernize the methods of consumer servicing that unauthorized insur-
ers are permitted to use, including in-person, mail, telephone, web
portal or any other electronic means, and treat all residents of New
York the same regarding post-issuance service-related interactions with
their insurance company.

 
SUMMARY OF PROVISIONS:

Section 1. A new paragraph (9) is added to subsection (b) of section
1101 of the insurance law to provide that with respect to the trans-
actions described in subparagraphs (B), (D) and (E) of paragraph two of
              

subsection (b), such transactions, if effected from outside this state
by an unauthorized foreign or alien insurer duly licensed to transact
the business of insurance in and by the laws of its domicile or any
person or entity acting on its behalf, or from within or outside of this
state by an authorized insurer on behalf of such unauthorized foreign or
alien insurer, in either case, in-person or by mail, telephone, web
portal, or any other electronic means, shall not constitute doing an
insurance business in this state by such unauthorized foreign or alien
insurer and, if applicable, such authorized insurer.  Nothing in this
paragraph shall be construed to permit any unauthorized foreign or alien
insurer, or any person or entity acting on its behalf, to sell, solicit,
negotiate, deliver or issue for delivery in this state, any insurance
policy or contract.

Section 2. Effective Date

 
JUSTIFICATION:

A Department of Financial Services' Insurance Circular Letter, No. 10
(2019), provides an accurate summary of the current law: "Insurance Law
§ 1102(a) prohibits any person, firm, association, corporation or joint-
stock company from doing an insurance business in New York unless
authorized by a license in force pursuant to the Insurance Law or
explicitly exempted by the Insurance Law.

Insurance Law § 1101(b)(1) states that certain acts in New York,
effected by mail from outside New York or otherwise, by any person or
entity, constitute doing an insurance business in New York. These acts
include: (1) making, or proposing to make, as insurer, any insurance
contract, including either issuance or delivery of a policy or contract
of insurance to a resident of New York or to any firm, association, or
corporation authorized to do business in New York, or solicitation of
applications for any such policies or contracts; and

(2) collecting any premium, membership fee, assessment or other consid-
eration for any policy or contract of insurance.


Insurance Law § 1101(b)(2)(B) provides a limited exception that an unau-
thorized insurer engaging in a transaction with respect to a group annu-
ity contract issued to a group as described in Insurance Law § 4238(b)
(except paragraphs 6 and 7 thereof) will not be doing an insurance busi-
ness in New York when the master contract has been lawfully issued
outside of New York in a jurisdiction where the insurer is authorized to
do an insurance business and all subsequent acts or transactions
(including ongoing servicing of the contract or certificates) are
effected by mail (including email) from outside New York. However, the
unauthorized insurer may not make telephone calls, provide access to web
portals (except in the limited circumstances described in Insurance Law
§ 1101(b)(8)), or engage in any other manner of communication with any
person in New York from outside New York.

An unauthorized life insurer in no event may solicit, negotiate, sell,
or service group annuity contracts through in-person meetings, telephone
calls, mail, emails, access to web portals or otherwise from an office
or any other location in New York. Nor may the insurer collect or
receive any premium or other fees in New York."

Insurance Law § 1101(b)(2)(D) and (E) provide similar limited exceptions
as Insurance Law § 1101(b)(2)(B).

Insurance Law § 1101(b)(2)(D) provides a limited exception that an unau-
thorized insurer may engage in transactions with respect to policies or
annuity contracts lawfully issued without this state occurring subse-
quent to issue, if, at the time of issue, such policies or contracts
covered subjects of insurance or risks not resident or located in this
state.

Insurance Law § 1101(b)(2)(E) provides a limited exception that an unau-
thorized insurer may engage in transactions with respect to policies of
insurance on risks located or resident within or without this state
(except master policies or contracts of group insurance which are
subject to the requirements of subparagraph (B) thereof), which policies
are principally negotiated, issued and delivered without this state in a
jurisdiction in which the insurer is authorized to do an insurance busi-
ness.

This bill is narrowly drafted to modernize the methods of post-issuance
servicing that unauthorized insurers may use in certain limited cases.
This bill is not intended to expand the ability of unauthorized insur-
ers, or any persons or entities acting on their behalf, to sell, solic-
it, negotiate, deliver or issue for delivery in New York any insurance
policy or contract.

Whereas the current exemption authorizes servicing by mail only, this
bill would authorize servicing in-person, by mail, telephone, web
portal, or by any other electronic means if effected from outside this
state by the unauthorized insurer or an entity acting on its behalf, or
from within or outside of this state by an authorized insurer on behalf
of such unauthorized insurer. This change is long overdue and necessary
to meet consumer expectations.

The bill also provides that the broader "servicing exemption" can be
used for the following transactions: 1) transactions with respect to
group life, group annuity, group accident and health or blanket accident
and health insurance that otherwise satisfy Insurance Law §
1101(b)(2)(B); 2) transactions with respect to policies or annuity
contracts lawfully issued without New York occurring subsequent to
issue, if, at the time of issue, such policies or contracts covered
subjects of insurance or risks not resident or located in this state
(Insurance Law § 1101(b)(2)(D)); and 3) transactions with respect to
policies of insurance on risks located or resident within or without
this state, which policies are principally negotiated, issued and deliv-
ered without this state in a jurisdiction in which the insurer is
authorized to do an insurance business (Insurance Law § 1101(b)(2)(E)).

By way of example, here are some instances in which the newly contem-
plated exemption would apply:

1. A Connecticut resident with a life insurance or annuity policy issued
by a Texas company (with no New York license) moves to New York. The
"new" New York resident can no longer access the insurance company's web
portal or call center for any transaction, including effectuating an
address change.

2. A New Jersey resident with an individual annuity policy issued by a
Nebraska company (with no New York license) moves to New York. Before
the individual moved, he or she was receiving annuity payments by elec-
tronic transfer (EFT). Under current law, upon moving to New York, the
individual must now receive that payment by check via mail.

3. A beneficiary of a life insurance policy on a Michigan life issued by
a Michigan company (with no New York license) may not access the insur-
ance company's web portal or call center from New York to file a death
claim.

This bill would address these examples (and others) and allow the
consumers to be serviced by the insurer in-person, by mail, telephone,
email, web portal, or any other electronic means if effected from
outside this state by the unauthorized insurer or an entity acting on
its behalf, or from within or outside of this state by an authorized
insurer on behalf of such unauthorized insurer. This narrow legislative
fix does not permit any solicitation or sales in New York by an unau-
thorized insurer.

 
LEGISLATIVE HISTORY:

This is a new bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.