Advertising Code (NAIC)

MR. WATSON: What do you think the Advertising Code addresses?

MR. WATSON: Advertising. They decide what you can advertise, what marketing that is allowed.

• Policy renewals,
• cancellation and termination provisions,
• testimonials, statistics, and
• special offers are also found in the advertising code.

 

Unfair Trade Practices Act ***(NAIC)

MR. WATSON: The N.A.I.C also came out with something called the Unfair Trade Practices Act . Most states adopted this as well. This gives the Chief Financial Officer the power to:

• investigate insurance companies and producers
• issue cease and desist orders
• impose penalties on violators
• seek a court injunction

MR. WATSON: What are unfair trade practices? ***

• coercion and intimidation - (the act of forcing or compelling someone to purchase an insurance policy through the use of threats, intimidation, or manipulation)
• unfair discrimination - when similar risks are treated differently and premiums are based not on relative risk but on factors like race or income
• misrepresentation
• inequitable administration or claims settlements
• false advertising

We will also be talking about all of these topics in later law chapters.  For now, it’s just important to remember that the Unfair Trade Practices Act gives the CFO or the insurance commissioner the right to basically investigate and impose certain penalties on agents, and it specifies certain bad behaviors - things insurance agents shouldn’t do.  But in later chapters, when we talk about what the CFO is allowed to do and when we give the definitions of the different unfair trade practices, pay close attention because you will absolutely need to know those things. 

 

State Guarantee Association***

MR. WATSON: The FDIC guarantees money I put in a bank. Do you agree?

STUDENTS: Yes.

MR. WATSON: We also have a state guaranty association. It guarantees you, the policyholder, that if the company goes belly up (insolvent), the State Guarantee Association will pay the claim. So who puts money into that fund, into this state guarantee association? Is it the insurance companies? Is it the states? Or is it the state and the insurance companies?

STUDENTS: Insurance companies, only.

MR. WATSON: Correct, only insurance companies. It's not both. Only the insurance companies fund the State Guarantee Insurance Association. They guarantee death benefits and cash values up to a certain amount. Okay?

STUDENTS: Okay.

MR. WATSON: Remember this, You can not use this in any form of advertising. Remember this!