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Monday, August 26, 2013

New York DFS: Free Tracking by Unaffiliated Producers is a Prohibited Rebate

The New York Department of Financial Services (DFS) issued a supplement to its 1995 circular letter on force-placed insurance tracking services. The bulletin states that unaffiliated insurance producers may not provide free tracking services to a mortgage servicer because the free service amounts to a rebate, which is prohibited by law.

According to the DFS bulletin, "An insurance producer, including an excess line broker, that is not an affiliate of an insurer and offers a mortgage servicer or lender, for a reduced fee or no separately identifiable charge, to track insurance coverage that the producer did not sell, solicit, or negotiate would thus violate Insurance Law § 2324(a)." 

The bulletin also states that the violation would occur "because the tracking services are 'valuable consideration' and the insurance producer is not servicing a policy that the producer sold, solicited, or negotiated."

Learn more from New York DFS