* Affinity insurance brokerage, a sales model whereby an insurance producer gains access to potential insureds through a sponsoring organization, typically an unlicensed entity, is nothing new. Trade associations, fraternal societies and clubs of all sorts have for decades entered into arrangements with licensed insurance producers permitting or encouraging the sale of insurance products to the sponsoring organization's members. Given that all United States jurisdictions regulate the ability of producers to share compensation with unlicensed parties, compensation issues typically become a tricky regulatory challenge in affinity relationships.
The advent of the internet as an insurance sales platform, including the exploding world of Insuretech, presents even greater challenges in parsing the regulatory treatment of compensation to unlicensed parties. Internet affinity sales models can include a new generation of unlicensed tech participants in the chain. Indeed, traditional producer licensing requirements present unique challenges when applied to the range of Insuretech and internet affinity programs.
This article will address the current state of regulations governing compensation to unlicensed parties in the affinity brokerage context and the application of such rules to the fast- paced world of Insuretech and internet-based insurance sales.
KEY LICENSING CONCEPTS
The Producer Licensing Model Act
The activities and licensure requirements of insurance producers are regulated at the state level, and each state's statutes and regulations vary. While this can present a challenge to insurance producers who transact business in multiple jurisdictions, there is some degree of uniformity among state insurance producer licensing laws due to efforts of the National Association of Insurance Commissioners ("NAIC"), an organization governed by the chief insurance regulators from all fifty states. The NAIC has promulgated a series of "Model Laws," including a "Producer Licensing Model Act" ("PLMA") which streamlines the statutory language relating to qualifications and procedures for insurance producer licensing. Today, the insurance producer laws of most states are based upon, if not identical to, the PLMA (Model 218).
The insurance producer laws of the State of New York are one example of those which are based on the PLMA. They are also some of the most stringent insurance producer laws in the country. The New York State Department of Financial Services ("NYDFS") has produced the most extensive body of regulatory authority on topics such as of the sale of insurance, referrals of insurance and insurance commission splitting by licensed and non-licensed entities. As such, reference to New York's insurance law and regulatory guidance will be made herein.
An insurance producer is, in its...