Permits certain agreements by domestic mutual insurance corporations.

---

S3539-2013 Actions

• Mar 18, 2013: referred to insurance
• Mar 18, 2013: DELIVERED TO ASSEMBLY
• Mar 18, 2013: PASSED SENATE
• Feb 27, 2013: ADVANCED TO THIRD READING
• Feb 12, 2013: 2ND REPORT CAL.
• Feb 11, 2013: 1ST REPORT CAL.56
• Feb 5, 2013: REFERRED TO INSURANCE

S3539-2013 Meetings

Insurance: Feb 11, 2013

S3539-2013 Calendars

Active List: Mar 18, 2013 , Floor Calendar: Feb 12, 2013 , Floor Calendar: Feb 27, 2013 , Floor Calendar: Feb 28, 2013 , Floor Calendar: Mar 4, 2013 , Floor Calendar: Mar 5, 2013 , Floor Calendar: Mar 6, 2013 , Floor Calendar: Mar 7, 2013 , Floor Calendar: Mar 11, 2013 , Floor Calendar: Mar 12, 2013 , Floor Calendar: Mar 13, 2013 , Floor Calendar: Mar 14, 2013 , Floor Calendar: Mar 18, 2013

S3539-2013 Votes

S3539-2013 Memo

BILL NUMBER:S3539

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  policy-
holders  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  corpo-
ration'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  corpo-
ration  in  which  any  such officer or director is pecuniary 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  busi-
ness.

The Insurance Department has interpreted this law as prohibiting a mutu-
al  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 serves as director
would have affiliates or subsidiaries that engage  in  insurance  activ-
ities. 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 offi-
cers of various other corporations.

LEGISLATIVE HISTORY: S.2875 of 2011-12; S.7794 of 2010

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately.

S3539-2013 Text

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

                                    3539

                         2013-2014 Regular Sessions

                              I N  SENATE

                              February 5, 2013
                                 ___________

  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.
                                                             LBD08131-01-3