Texas General Lines — Property and CasualtyTexas Laws and RegulationsEasy
A Texas-licensed insurance agent is selling a homeowners policy and informs the client that the policy will cover flood damage. The agent knows that standard homeowners policies explicitly exclude flood coverage. Which unfair trade practice has the agent committed?
- ADefamation
- BMisrepresentation
- CUnfair Discrimination
- DTwisting
Show answer & explanationAnswer & explanation
Correct answer: B. Misrepresentation
The agent provided false information about the policy's coverage, which constitutes misrepresentation. Misrepresentation involves making false statements about insurance policies or benefits.
Why the other options are wrong
- A. Defamation involves making false statements that harm another insurer's reputation.
- C. Unfair Discrimination involves treating individuals differently based on factors not related to risk.
- D. Twisting involves inducing a policyholder to lapse or surrender an existing policy to replace it with another, often to the policyholder's detriment.
Misrepresentation (Unfair Trade Practice)
Making false statements of material fact regarding the terms, benefits, advantages, or dividends of any insurance policy.
- Involves providing incorrect information.
- Can be oral or written.
- Prohibited under Texas insurance law.
Memory trick: Don't twist, misrepresent, defame, or unfairly discriminate in Texas insurance.