Life & Health Insurance Exam (National Portion)General InsuranceMedium
An insurance producer is explaining a new whole life policy to a potential client. The client asks about the cash value growth and the death benefit. The producer incorrectly states that the policy's cash value is guaranteed to grow at 8% annually and that the death benefit will double after 10 years, neither of which is true according to the policy document. This action by the producer is an example of:
- ATwisting
- BDefamation
- CFalse Advertising
- DCoercion
Show answer & explanationAnswer & explanation
Correct answer: C. False Advertising
False advertising in insurance involves making untrue, deceptive, or misleading statements about an insurance policy's benefits, advantages, conditions, or terms in an attempt to induce a sale.
Why the other options are wrong
- A. Twisting is inducing a policyholder to lapse or forfeit an existing policy to replace it with another, to the detriment of the policyholder.
- B. Defamation involves making false and malicious statements about another insurer or producer.
- D. Coercion is forcing a person to buy insurance by threatening to withhold a loan or service.
Unfair Trade Practice: False Advertising
Making or disseminating untrue, deceptive, or misleading statements in an advertisement or sales material regarding the business of insurance or any person in the conduct of their insurance business.
- Includes oral and written statements
- Concerns policy benefits, terms, or conditions
- Aims to induce purchase or exchange of policies
Memory trick: Don't play dirty in the insurance game; keep it fair and square.