Marketing Practices & Regulation of Marketing Practices
Unfair Acts Prohibited [304.12-130]
A person who is charged with engaging in an unfair method of competition or committing an unfair or deceptive act or practice is entitled to a hearing before the Commissioner. The person must be notified of the time and place of the hearing. The notice will also specify the offenses and violations with which the person is charged. The Commissioner or Attorney General may also seek an injunction against a person who continues to engage in an unfair method of competition or act or practice.
Advertising Files [Reg. 806.12-010.18, .19]
Every insurer must keep in its home office a file that contains every advertisement used to market its individual and group insurance policies, with information concerning how and to what extent the ad was distributed. This file is subject to examination by the Department. The insurer must maintain this file for at least three years. An insurer must also file a certificate each year with its annual report stating that the advertisements it used during the year complied with the law.
Agent Johns started offering potential clients courtside tickets to a professional basketball game in exchange for purchasing a life insurance policy. Which statement is correct? Agent Johns has engaged in unlawful conduct. Agent Johns's conduct is not unlawful if the value of the tickets is less than $1,000. Agent Johns can offer tickets as an inducement to purchase insurance, if approved by the insurer he represents. Agent Johns has not engaged in unlawful conduct.
Agent Johns has engaged in unlawful conduct. Offering anything of value that is not specified in the contract as an incentive to purchase insurance is considered an unlawful inducement and is illegal.
Restrictions on Advertising [Regs. 806.12-010.3 to .17]
All advertisements must be truthful and not misleading. They must clearly identify the insurer and the policies or services advertised. Any use of statistics in an ad must include the source of the statistics. An ad that is intended to be seen or heard beyond the jurisdiction in which the insurer is licensed cannot imply that the insurer is licensed beyond that jurisdiction. An ad cannot make unfair or incomplete comparisons of policies or benefits offered by other insurers. It cannot disparage competitors or their products, services, or business methods, and cannot disparage other methods of marketing insurance. Advertisements may not use words or phrases such as all, full, or unlimited in a manner that exaggerates any benefit beyond the terms of the policy. Advertisement for policies providing benefits for specified illnesses only, such as cancer, must clearly state the limited nature of the policy and cannot imply coverage beyond the terms of the policy. Advertisements must disclose the provisions relating to renewability, cancelability, and termination. The fact that a policy offers a free-look period or offer to refund premiums if not satisfied is not a cure for misleading or deceptive statements contained in an advertisement. Testimonials used in marketing materials must be genuine and represent the current opinion of their author. These must be reproduced accurately and completely enough to avoid misleading prospective customers about their nature or scope. In addition, marketing materials cannot give the impression that the insurer or its products are recommended or endorsed by a governmental entity, society, association, or other organization unless that is true. Advertisements by direct mail insurers must disclose whether the insurer is or is not licensed in a particular state. Advertisements for group policies may not state or imply that prospective policyholders become group or quasi-group members and enjoy special rates or underwriting privileges, unless that is true. An ad may not state or imply that a particular policy is an introductory, initial, or special offer and that the applicant will receive advantages by accepting the offer, unless that is true. Advertisements cannot imply that claim settlements will be liberal or generous beyond the terms of the policy. They also cannot contain statements about an insurer's assets, financial standing, or position in the insurance industry that are untrue or misleading.
Testing for HIV [304.12-013]
Before testing for HIV infection, an insurer must obtain the applicant's informed written consent. The insurer must explain the test's purpose, potential uses and limitations, test result meanings, and right to confidential treatment of testing information. The applicant must designate a physician who will notify the applicant if test results are positive. An applicant must be informed about: the availability of face-to-face post-test counseling on the meaning of the test results, the possible need for additional testing, and the need to eliminate behavior that might spread the disease to others; the availability of health-care services, mental health care, and social and support services; the benefits of locating and counseling any individuals who may have been exposed to the HIV virus by the infected person; and the availability of public health counseling services. An insurer may require an applicant to take an HIV test based on: the applicant's health condition or health history the amount of insurance applied for An insurer may also require an applicant to take an HIV test if the test is required for all applicants. Insurers may ask applicants whether they have ever tested positive for HIV infection or related health conditions. However, they may not ask about negative test results. Insurers must keep HIV test results confidential. Test results may be disclosed only as required by law or pursuant to the applicant's written request or authorization. An insurance policy may not exclude coverage for HIV infection and may not contain terms or conditions that treat HIV infection differently than other health conditions. A health insurance contract cannot be canceled or nonrenewed solely because a person has been diagnosed as having or has been treated for HIV infection. Sexual orientation may not be used in the underwriting process or to determine which applicants will be tested for HIV infection. Marital status, living arrangements, occupation, gender, beneficiary designation, and zip codes may not be used to determine an applicant's sexual orientation.
Cease and Desist Order [304.12-120]
If the Commissioner finds, after a hearing, that a person has engaged in a prohibited act or practice, the Commissioner will order the person to desist from the act or practice. A cease and desist order becomes final when the person does not appeal the order; or if the order is appealed, a court affirms the Commissioner's final order or dismisses the appeal.
Illegal Inducements [304.12-110]
Insurers and producers are prohibited from offering the following as an inducement to purchase insurance: employment shares of stock or securities advisory board contracts promising profits, special returns, or special dividends prizes, merchandise, or property worth more than $25
Prohibited Inducements [304.12-090]
Insurers and their agents cannot pay or offer to pay anything of value to induce someone to buy insurance, including a rebate, discount, credit, or reduction of the premium or advantages in dividends. They also cannot pay or offer to pay anything of value that is not specified in the insurance contract. It is also unlawful for insureds to accept a rebate, discount, or reduction of premium, a special favor or advantage, or any valuable consideration or inducement.
Which statement about HIV testing is correct? Insurers may require applicants to take an HIV test based on their sexual orientation. Insurers must keep HIV test results confidential. Insurers may exclude coverage for HIV infection. Insurers may never ask about HIV test results.
Insurers must keep HIV test results confidential.
General Prohibitions [304.12-010]
It is unlawful to engage in an unfair method of competition or an unfair or deceptive act or practice while transacting insurance in Kentucky.
Boycott, Coercion, and Intimidation [304.12-070]
No one may enter into an agreement to boycott, coerce, or intimidate anyone that results in the unreasonable restraint of, or monopoly in, the insurance business.
False Financial Statements [304.12-040]
No one may make false statements about an insurer's financial statements with the intent to deceive the public or a public official. Furthermore, no one may make false entries in a book, report, or statement to deceive anyone who is examining an insurer's financial condition or affairs, or omit information that is relevant to the examination of the insurer's financial condition or affairs.
Defamation [304.12-060]
No one may publish or circulate a false, deceptive, or misleading statement about—or a statement that is maliciously critical of or derogatory to—the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business.
Advertising Prohibited Advertising Practices [Reg. 806.12-010.1]
The state regulates the content and delivery of insurance advertisements to ensure they are accurate and truthful. Insurers are to adhere to certain standards when marketing individual and group insurance policies in Kentucky. An advertisement consists of printed and published material and descriptive literature of an insurer that is used in newspapers, magazines, radio and TV scripts, and billboards; descriptive literature and sales aids such as circulars, leaflets, and form letters used by an insurer or its producers and brokers for presentation to the public; and prepared sales presentations used by producers.
Unfair Discrimination [304.12-080, 085]
Unfair discrimination occurs when persons of the same class and substantially equal risk are charged different premiums, fees, or other charges, or when different benefits are paid to these persons. Insurers and agents are also prohibited from refusing to issue or renew insurance because of a person's race, color, religion, national origin, or sex. However, insurers can charge different rates when the rates can be justified through valid actuarial tables. Insurers may not deny, cancel, or refuse to renew an individual or group policy, or vary a policy's premiums, terms, or conditions based on: -a genetic test -an insured's request for genetic services Insurers may not disclose any genetic test results about an insured without the insured's prior authorization. Insurers also may not require applicants for individual or group health insurance policies to disclose any prior genetic test results to the insurer.
When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? rebating unfair discrimination coercion defamation
defamation It is considered defamation to publish or circulate a false, deceptive, or misleading statement about—or a statement that is maliciously critical of or derogatory to—the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business.
The Commissioner has charged Brady with engaging in controlled business and unfair discrimination among applicants. If Brady continues to engage in these unlawful practices, what may the Commissioner do? immediately impose a fine of up to $10,000 per violation immediately revoke Brady's license seek an injunction to prohibit Brady from engaging in the acts notify the appointing insurer to cancel Brady's appointment
seek an injunction to prohibit Brady from engaging in the acts