Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOHard
An insurance agent is found to have made false statements about the financial condition of another insurance company to an existing client, with the intent to persuade the client to switch insurers. This act is a violation of which unfair trade practice?
- ATwisting
- BDefamation
- CMisrepresentation
- DFalse Advertising
Show answer & explanationAnswer & explanation
Correct answer: B. Defamation
Defamation is the act of making, publishing, or circulating false statements regarding the financial condition of an insurer, or critical statements calculated to injure any person engaged in the insurance business. The intent to persuade a client to switch insurers by disparaging another company falls under this definition.
Why the other options are wrong
- A. Twisting involves misrepresentation to induce a policyholder to lapse an existing policy for a new one, usually with the same insurer or by focusing on policy terms, not outright lies about a competitor's financials.
- C. Misrepresentation involves false statements about policy terms, not another company's financial state.
- D. False Advertising refers to misleading public communications, not targeted disparagement of a competitor.
Defamation (Unfair Trade Practice)
Making, publishing, or circulating false statements about the financial condition of an insurer, or critical statements calculated to injure any person engaged in the insurance business.
- Targets the reputation or financial standing of another insurer.
- Statements must be false and intended to harm or induce a switch.
- Is a prohibited unfair trade practice.
Memory trick: Defame a rival's wealth, that's defamation's stealth.