Marketing Practices

In this section we will look at some actions that are considered unfair marketing practices, including sliding, coercion and intimidation, misrepresentation, defamation, false advertising and unfair discrimination, as well as twisting and churning, controlled business, and another look at rebating. If some of these phrases sound familiar, it is because many of these are considered unfair trade practices under the Unfair Trade Practices Act that we talked about in detail at the end of chapter 2. All of these phrases are extremely important and will be very helpful to you in the licensing process.

Unfair methods of competition

The following are designed as unfair methods of competition and unfair or deceptive acts or practices.

Sliding *****

Sliding basically means that the agent was putting additional coverages (called ancillary coverages here) on a policy that brought an extra cost to the policyowner, but the agent was not being honest about doing so. Obviously, none of this is allowed.

1. Telling the applicant that a specific ancillary coverage or product is required by law in order to purchase of insurance when the extra coverage or product is not required.
2. Telling the applicant that a specific ancillary coverage or product is included in the policy applied for without an additional charge when a charge is actually required.
3. Charging an applicant for a specific ancillary coverage or product in addition to the cost of the insurance coverage applied for, without the informed consent of the applicant.

Boycott, Coercion, and Intimidation ****

Boycotting, coercion, and intimidation result in, or tend to result in, the unreasonable restraint of, or monopoly in, the business of insurance.

Coercion might include your mortgage lender telling you that they will not give you the mortgage unless you also buy the life insurance that covers the mortgage from that lender - so, we won't sell you this one thing unless you also buy the other thing from us.

Intimidation might include something that looks like blackmail - so, if you don't buy this policy from me right now then I'm going to tell your wife where I saw you last weekend.

Of course, both of those are pretty extreme examples, but they are simply meant to convey an idea.

Misrepresentations and false advertising of insurance policies *****

As an insurance agent, you legally represent the insurance company. So who could you misrepresent? The insurance company.

Misrepresentation is generally when you are trying to make yourself, your company, or your products look better than what they actually are for the purpose of making a sale. False advertising speaks for itself.

Misrepresentations and false advertising includes but is not limited to the following:

• Misrepresent the benefits, advantages, conditions, or terms of any insurance policy
• Misrepresent the dividends to be received on any insurance policy (Remember, we never guarantee dividends.)
• Misleading as to the financial condition or the legal reserve system upon which any life insurer operates (Saying the company is in better financial shape than it is.)
• Use any name or title of any insurance policy misrepresenting its true nature of the policy solicited
• Misrepresent any insurance policy as being shares of stock or misrepresents ownership interest in the company
• Use any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the state or the federal government is responsible for the insurance sales activities or that any person, the state, or the federal government guarantees any returns on insurance products

Defamation ****

Defamation involves knowingly spreading any kind of oral or written statement which is false or maliciously critical of or derogatory toward any person and which is calculated intentionally to injure such person.

So, to summarize misrepresentation and defamation: misrepresentation involves talking about your own company or yourself, while defamation involves talking about others.

False advertising

Knowingly spreading statements before the public:

• in a newspaper, magazine, or other publication;
• in the form of a notice, circular, pamphlet, letter, or poster;
• over any radio or television station; or
• in any other way an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance that is untrue, deceptive or misleading.

Unfair discrimination *****

People who represent the same risk to the insurance company must be rated the same.

For example: Jane and Sally are both the same age and represent the same health profile to the insurance company. Both are rated at a premium cost of $10 per $1000 of insurance. Jane buys $100,000 of coverage while Sally buys $10,000 of coverage. Now, Jane's premium will be 10 times Sally's premium, but that is because she is buying 10 times the amount of insurance, but notice that they were both rated at a cost of $10 per $1000 of the face amount. That is what we mean by saying the insurance company cannot discriminate for people in the same actuarial class.

Therefore, unfair discrimination involves knowingly allowing any unfair discrimination between individuals of essentially the same health hazards, the same actuarial class, equal life expectancy, etc. in life or health insurance or annuity rates, dividends, benefits, or any other terms of the contract. As I'm sure you can guess, insurers are not allowed to discriminate based on race, creed, marital status, sex, or national origin. (Note...The insurance company can not charge a higher premium to a risk in the same actuarial class; ex., two men age 40, one a Caucasian, one an African-American would be in the same actuarial class, even if the African-American has sickle-cell trait.)

Also, physical abuse, sexual abuse, and treatment of a psychological treatment in the past is not allowed to impact issuance of a policy, payment of a claim, cancellation or rate increases. An insurer or managed care provider is not allowed to refuse to issue or renew a policy, pay a claim, cancel a policy, or increase rates based up the fact that an insured has made a claim or sought medical or psychological treatment in the past for abuse or protection from abuse. The insurer or managed care provider many not consider that a claim was caused in the past by, or might occur as a result of, any future assault, battery, or sexual assault by a family or household member upon another family or household member. The insurer or managed care provider is allowed to refuse to underwrite, issue, or renew a policy based on the applicant's medical condition, but may not consider whether such condition was caused by an act of abuse.

No insurer in this state may refuse to issue a policy or charge a higher premium on a life or health insurance policy solely because the person to be insured has the sickle-cell trait.