NY OGC Opinion on Life Claims Adjusting

Posted on January 22, 2009 by Cailie Currin

An unusual dilemma for life insurers posed by NY law was once again addressed in a NY Office of General Counsel opinion dated December 30, 2008.   NY law does not include in the types of licenses available, an independent adjuster license for life insurance.  The 12/30 opinion states:  "The processing of life insurance claims, unlike other types of insurance claims, typically requires little discretionary authority on the part of the person or entity handling such claims."  

While that may be true for simple uncontested death claims, there are many benefits that are added to life insurance and annuity products that are not as clear cut as whether the insured is dead or not.   There are waiver of premium riders based on disability, there are accelerated death benefits based on various health conditions or life expectancy, and other benefits that may require that discretion be applied.  This is acknowledged in the opinion.  

However, without the availability of an adjuster's licence, that often-necessary discretion can only be exercised by a limited number of individuals with a direct relationship to an authorized NY insurer.  Without the independent adjuster license, employees of another insurer, affiliated with the NY company but not licensed as a NY insurer, cannot exercise discretionary authority in claims processing.  

In the words of OGC:  "Since [the unauthorized life insurer] does not come within any of the statutory exceptions, it may only perform ministerial functions with respect to the processing of life insurnace on behalf of [its affiliated NY-licensed life insurance company.]"

Due to the number of NY-only life insurers, this is often a problem that arises when there is a limited number of employees of the NY company.  

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Does a TPA need a license in NY?

Posted on May 29, 2008 by Cailie Currin

It depends, opined New York’s Office of General Counsel recently.

If a third-party administrator (TPA) is doing work that needs a license in New York – such as adjusting insurance claims – then a license is necessary. If it is doing work that does not require a license, then no license is needed, according to Alan Rachlin, an attorney for the Insurance Department.

The opinion was issued in response to an inquiry from a domestic life insurer's affiliate that administers employee benefit plans, including health, dental claims, and disability processing. This entity applied to another jurisdiction for a TPA license, and was asked for a letter from New York stating that New York does not require a license.

No letter is immediately forthcoming, because the issue is not clear cut.  The OGC said the TPA needs to submit a full description of all its activities. If none of the activities requires a license, then the state will issue the letter. 

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