Life & Health Insurance Exam (National Portion)Ethics and SuitabilityEasy
A new insurance producer is struggling to meet sales quotas. To expedite a sale, the producer tells a client that a health insurance policy covers a pre-existing condition, even though the producer knows the policy has a 12-month exclusion period for that specific condition. Which unethical practice is the producer committing?
- ADefamation
- BMisrepresentation
- CTwisting
- DRebating
Show answer & explanationAnswer & explanation
Correct answer: B. Misrepresentation
Misrepresentation is making false statements or omitting material facts about an insurance policy. In this case, the producer is falsely stating that a pre-existing condition is covered when there is an exclusion period, directly misleading the client.
Why the other options are wrong
- A. Defamation is making false and malicious statements about another insurer or producer.
- C. Twisting involves inducing a policyholder to lapse an existing policy to buy a new one to the insured's detriment.
- D. Rebating is offering a portion of the producer's commission or other valuable consideration to an insured as an inducement to purchase a policy.
Misrepresentation (Unethical Practice)
The act of making false, misleading, or deceptive statements or omissions of material facts regarding an insurance policy, its benefits, terms, or conditions, to a current or prospective client.
- Prohibited by state insurance laws and ethical codes.
- Can result in fines, license suspension, or revocation.
- Undermines client trust and informed decision-making.
Memory trick: Don't Mislead, Don't Twist, Don't Rebate.