Lockton Affinity – NJDOBI Consent Order Highlights Affinity Marketing Risk
Analysis by Genevra Burns Law Offices, New Jersey
Affinity Brokerage relationship can present regulatory risk. On September 5, 2019, the State of New Jersey, Department of Banking and Insurance entered a Consent Order in the Matter of Proceedings by the Commissioner of Banking and Insurance, State of New Jersey, to fine Lockton Affinity, LLC, Reference No. 9026721. Under the Consent Order, Lockton Affinity agreed to pay $1 million as a penalty for administering a National Rifle Association (NRA)-sponsored insurance program, known as the Carry Guard insurance program, which was in violation of New Jersey insurance laws.
The Department’s investigation found that Lockton Affinity, a licensed nonresident insurance producer with various lines of authority including surplus lines, through a contract with the NRA, allowed the NRA (not licensed as an insurance producer) to directly solicit for the Carry Guard insurance program, which offered self-defense insurance. It was found that this was a violation of New Jersey insurance regulations which prohibit a licensed insurance producer to allow any unlicensed person to transact the business of an insurance producer in New Jersey. The crux of the violation was that NRA maintained and hosted a website that described and solicited for the Carry Guard insurance program, and the NRA sent emails directly to NRA members soliciting the purchase of Carry Guard insurance.
The Department found as further violations of New Jersey regulations: (1) that the Carry Guard insurance program included benefits for health insurance, which was prohibited as New Jersey law does not permit surplus lines insurers from writing health insurance; and (2) that Lockton Affinity did not execute a separate agreement with the New Jersey Carry Guard certificate holders for the administrative fee retained by Lockton Affinity, as required by state law.
The NJDOBI Order follows an earlier Consent Order entered by NYDFS on May 2, 2018 where Lockton agreed to pay a $7 million fine and to no longer participate in the Carry Guard Program or any other insurance program involving the NRA in the state of New York (the May 2, 2018 Consent Order was supplemented on January 31, 2019 and added an additional $400,000 in fines).
