An inquirer recently asked the New York Department of Financial Services Office of General Counsel (the “OGC”) whether (1) lunch bought for an insurance producer by an insurer qualifies as compensation to be disclosed under Regulation 194 (effective January 1, 2011); and (2) if it qualifies, how should an insurer maintain a record of the cost of that lunch when multiple producers are present at the lunch, but only one is the binding producer?  See N.Y. Dept. of Fin. Serv. Opinion No. 11-08-01 (August 5, 2011).

After an analysis of the language of Regulation 194, the OGC determined that lunch would qualify as compensation “only if receipt of the lunch is based in whole or in part on an insurance contract an insurance producer sells.”  As an example, the OGC stated that a lunch that is provided by an insurer “as a reward for an insurance producer placing a certain amount of business with the insurer” would be considered compensation.  However, “if an insurer provides lunch to all of its insurance producers during a training class, without regard to the amount of business the producers place with the insurer, then the lunch . . . would not qualify as compensation.”

As for record keeping, the OGC stated that under Regulation 152, if an insurer is providing lunch to an insurance producer “based in whole or in part on an insurance contract the producer sold,” then the insurer must maintain a record of the cost of the producer’s lunch.  In order to determine the cost of the meal provided to the binding producer, the OGC suggested to either record the actual amount of the producer’s meal, or to simply divide the total cost of the lunch by the number of people present.