Examkin

Question

Difficulty: MediumUnfair Trade Practices

Insurance regulators closely monitor the marketplace for violations of statutory trade laws. Match each producer's action below with the specific unfair trade practice it represents.

  • A producer tells a prospective buyer that a competing insurer is facing imminent bankruptcy, despite knowing their financial rating is excellent.Defamation
  • An agent promises to give a client a portion of their commission if the client agrees to purchase a comprehensive health policy today.Rebating
  • A bank loan officer implies that a commercial loan application will only be approved if the business purchases liability insurance directly through the bank's affiliated agency.Coercion
  • A broker convinces a client to replace their existing life insurance policy with a new one by intentionally omitting details about the new policy's higher surrender charges.Twisting

Answer

The correct matches are: making false bankruptcy claims to Defamation; sharing commissions to Rebating; linking loan approval to insurance purchase to Coercion; and omitting surrender charge details during a replacement to Twisting.
Each scenario directly violates a specific provision of the NAIC Model Unfair Trade Practices Act. Defamation targets competitors with false financial claims. Rebating offers illegal inducements like commission sharing. Coercion uses unfair leverage, often in lending, to force a sale. Twisting uses misrepresentation to encourage an unwise policy replacement.

Step-by-Step Solution

1
Analyze the action involving false statements about an insurer's financial health.
This action matches the definition of defamation.
Defamation specifically involves circulating false or maliciously critical information to injure another party in the insurance business.
2
Evaluate the agent's offer to share their commission with the client.
This action aligns with the definition of rebating.
Rebating is defined as providing an inducement or premium discount that is not expressly written into the policy contract.
3
Examine the loan officer's condition requiring the borrower to use a specific agency.
This action represents coercion.
Coercion involves unreasonable restraint of trade, such as using intimidation or leverage in a non-insurance transaction to force an insurance sale.
4
Review the broker's method of convincing the client to replace a policy by omitting detrimental facts.
This action characterizes twisting.
Twisting is a specific type of misrepresentation designed to induce a client to lapse, forfeit, or surrender their current policy for a new one.

Key Concept

Unfair Trade Practices
Estimated Time:1m 30s
Rate this question

Topics

Unfair Trade Practices

More questions from this topic