Compensation for Sale of Customer Lists

The Insurance Law permits an insurance broker or insurance agent to pay unlicensed individuals or entities for referrals. That is, where there is no discussion of insurance policy terms and the compensation is not based upon the sale of insurance. Under limited circumstances briefly explained here, a licensee may even compensate a nonlicensee based upon the actual purchase of insurance.

The Department addressed this issue earlier this year, in Office of General Counsel Opinion No. 11-01-06 (Jan. 28, 2011) in the context of the sale of an organization’s list of supporters. According to the Department, a non-licensee can sell a list of its supporters or members to an insurance agent and that such a sale does not constitute a “referral.”

In fact, in Opinion No. 11-01-06, the Department explained that in the context of the sale of a list, a licensee may compensate the non-licensee “based on the actual purchase of insurance.”

This Opinion is consistent with prior opinions issued by the Department. For instance, the Department had previously opined that “[t]he mere purchase by a licensed property/casualty insurance agent of a customer list from a real estate agent does not constitute a referral . . . whereby the non-licensee does not refer or recommend such agent or broker to a customer.” O.G.C. Op. No. 03-09-07 (Sept. 9, 2003). In addition, Circular Letter No. 5, issued in 2001, specifically recognizes:

The New York Insurance Law does not prohibit licensees from purchasing lists of customer names and related information from non-licensees for the purposes of soliciting insureds. The compensation payable to non-licensees for such lists may be contingent upon the successful placement by the licensee of the insurance and may be a percentage of the insurance commission the licensee earned from placing the business.

The distinction is that with a referral, a nonlicensee is making a recommendation or other affirmative act to a prospective insured (“call XYZ Broker”) but with the mere sale of a customer or membership list, the nonlicensee is not communicating or otherwise making a recommendation to the potential insured to purchase insurance or contact a particular agent or broker.

Thus, if there is an affirmative act by the non-licensee to the prospective insured, such as a recommendation that the prospective insured contact a certain insurance agent, then the price of the list may not be based on a percentage of sales. OGC Op. No. 11-01-06 (Jan. 28, 2011); OGC Op. No. 02-04-33 (Apr. 29, 2002).