Bill S3539A-2013

Permits certain agreements by domestic mutual insurance corporations

Permits certain agreements by domestic mutual insurance corporations.

Details

Actions

  • Oct 21, 2014: SIGNED CHAP.410
  • Oct 9, 2014: DELIVERED TO GOVERNOR
  • Jun 19, 2014: returned to senate
  • Jun 19, 2014: passed assembly
  • Jun 19, 2014: ordered to third reading rules cal.438
  • Jun 19, 2014: substituted for a4833a
  • Jun 17, 2014: referred to insurance
  • Jun 17, 2014: DELIVERED TO ASSEMBLY
  • Jun 17, 2014: PASSED SENATE
  • Jun 10, 2014: AMENDED ON THIRD READING 3539A
  • May 7, 2014: ADVANCED TO THIRD READING
  • May 6, 2014: 2ND REPORT CAL.
  • May 5, 2014: 1ST REPORT CAL.490
  • Jan 8, 2014: REFERRED TO INSURANCE
  • Jan 8, 2014: returned to senate
  • Jan 8, 2014: died in assembly
  • 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

Calendars

Votes

Memo

BILL NUMBER:S3539A

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 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. It also requires the superintendent to review these agreements annually and gives him or her the power to revoke approval if the agreements no longer conform with the requirements in this section.

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 corporation in which any such officer or director is pecuniarily 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 business.

The Insurance Department has interpreted this law as prohibiting a mutual 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 activities. 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 officers of various other corporations.

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

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately


Text

STATE OF NEW YORK ________________________________________________________________________ 3539--A Cal. No. 490 2013-2014 Regular Sessions IN SENATE February 5, 2013 ___________
Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- recommitted to the Committee on Insurance in accordance with Senate Rule 6, sec. 8 -- reported favorably from said committee, ordered to first and second report, ordered to a third reading, amended and ordered reprinted, retaining its place in the order of third reading 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. ANY SUCH AGREEMENT APPROVED BY THE SUPERINTENDENT SHALL BE
SUBJECT TO ANNUAL REVIEWS AND, WHERE THE SUPERINTENDENT DETERMINES SUCH AGREEMENT NO LONGER CONFORMS TO THIS SUBSECTION, THE SUPERINTENDENT SHALL REVOKE HIS OR HER PRIOR APPROVAL. S 2. This act shall take effect immediately.

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