Law & Ethics Update

Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Chapter 69B-151.201

The purpose of this chapter, 69B-151.201, is to implement the provisions of Unfair Methods of Competition and Unfair or Deceptive Acts or Practices, with respect to churning and to adopt Form OIR-D0-1180. This rule applies to all types of policies that include a value feature, irrespective of the marketing method by which such policies or contracts are sold. See Subchapter of the same name, coming up.

Suitability and Disclosure in Annuity Contracts – Forms Required [Chapter 69B-162.011]

Selling annuities requires the use of state-required forms, the Annuity Suitability Questionnaire and the Disclosure and Comparison of Annuity Contracts. This rule applies exclusively to any recommendation to purchase or exchange an annuity contract made to a senior consumer by an insurance agent or an insurer, which results in the purchase or exchange recommended. A senior consumer is a person 65 years of age or older. In a joint purchase or exchange, if any party is 65 or older the joint purchasers are considered to be senior consumers. However, keep in mind Senate Bill 166 requires the same treatment be given to all annuity purchasers.

Unfair Methods of Competition and Unfair or Deceptive Acts or Practices

We will continue to cover unfair methods of competition and unfair or deceptive acts despite many having already been covered. This isn’t an indication insurers, agents, etc., selling health, life or annuity contracts require more focus on violations than those in other lines of insurance but how conducting deceptive business practices successfully is horribly unsuccessful. Rather, it is imperative to ensure everyone knows that in which you can or cannot participate, actions you must or must not take, and words you can or cannot use. You may also want to accept that turning a blind eye is not an appropriate  method of handling those with whom you work. Most unacceptable business practices require they be reported to the department if you know, should have known, or have reason to believe such deception is occurring in the insurance industry, and by whom. 

The further purpose is to regulate trade practices relating to the business of insurance in accordance with the intent of the McCarran-Ferguson Act of Congress. This is done by defining or providing for the determination of all practices in Florida that constitute unfair methods of competition or unfair or deceptive acts, by prohibiting the trade practices considered “unfair” and “deceptive.”  [



[626.9511] Definitions.—When used in this part:

(1)“Person” means any individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds insurer, fraternal benefit society, or business trust or any entity involved in the business of insurance.

(2)“Insurance policy” or “insurance contract” means a written contract of, or a written agreement for or effecting, insurance, or the certificate thereof, by whatever name called, and includes all clauses, riders, endorsements, and papers which are a part thereof.

[626.9601] Penalty for violation of cease and desist orders.—Any person who violates a cease and desist order of the department or office under s. 626.9581 while such order is in effect, after notice and hearing as provided in s. 626.9571, shall be subject, at the discretion of the department or office, to any one or more of the following:

· A monetary penalty of not more than $50,000 as to all matters determined in such hearing.

· Suspension or revocation of such person’s certificate of authority, license, or eligibility to hold such certificate of authority or license.

· Such other relief as may be provided in the insurance code.


Unfair Methods of Competition, Unfair or Deceptive Acts, or Practices Prohibited; Penalties

First things first: In Florida you cannot engage in “trade practices”, defined above, to be an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance.

If money didn’t talk, the likelihood of unfair or deceptive practices would probably decrease exponentially. As a result, those committing such acts subject themselves to severe financial penalties. [Source: §626.9521(1)]


For example:

Any person who violates these provisions is subject to a fine in an amount not greater than $5,000 for each non-willful violation and not greater than $40,000 for each willful violation. But that’s not all: Fines for non-willful violations can aggregate to $20,000 if they arise out of the same action or an aggregate amount of $200,000 for all willful violations arising out of the same action. The fines may be imposed in addition to any other applicable penalties.


· If a person violates the offenses known as “twisting,” or “churning,” the person commits a misdemeanor of the first degree, punishable as provided by criminal law, and an administrative fine not greater than $5,000 for each non-willful violation or an administrative fine not greater than $75,000 for each willful violation.

· If a person willfully submits fraudulent signatures on an application or policy-related document, the person has committed a felony of the third degree, punishable as provided in Penalties; Applicability of Sentencing Structures; Mandatory Minimum Sentences for Certain Reoffenders Previously Released From Prison, as well as administrative fines not greater than $5,000 for each non-willful violation or up to $75,000 for each willful violation.

· Administrative fines cannot exceed an aggregate amount of $50,000 for non-willful violations arising out of the same action or an aggregate amount of $250,000 for all willful violations arising out of the same action.



Identification of Insurers, Agents, and Insurance Contracts

Advertising materials and other communications developed by insurers, or authorized risk-bearing entities – approved by the office to do business in Florida regarding insurance products – must clearly indicate their communications relate to insurance products. When soliciting or selling insurance, agents must clearly indicate to prospective insureds they are acting as insurance agents with regard to insurance products, identified insurers, or other risk-bearing entities authorized under the code and approved by the office to do business in Florida.

There will be no liability to the insured on the part of, and no cause of action of any nature will arise against, any licensed and appointed insurance agent for the insolvency of a risk-bearing entity when the entity has been duly authorized by the office to do business in Florida. However, if the licensed and appointed agent was a controlling producer of the risk-bearing entity within two years before the insolvency, the agent is subject to penalties.

unfair methods of competition and unfair or deceptive acts or practices are not something in which this course teaches. It is not the goal of the course to plant seeds or educate you in deceptive acts but rather, provide you training in the appropriate and legal conduct requirements. Knowing what is allowable provides a baseline of measuring what is unacceptable. [Source: §626.9531]

Statute 626.9541, echoed by the title of this chapter, includes a lengthy list of unfair and deceptive acts; a summary of these practices follows:

Misrepresentations and False Advertising of Insurance Policies Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, comparison, or property and casualty certificate of insurance altered after being issued, which: 


· Misrepresents the benefits, advantages, conditions, or terms of any insurance policy

· Misrepresents the dividends or share of the surplus to be received on any insurance policy

· Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy

· Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system on which any life insurer operates

· Uses any name or title of any insurance policy or class of insurance policies misrepresenting its true nature

· Is a misrepresentation for the purpose of inducing the lapse, forfeiture, exchange, conversion, or surrender of a policy

· Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy

· Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company

· Uses any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that Florida or the Federal Government is responsible for the insurance sales activities of any person, stands behind any person’s credit, that any person, Florida, or the Federal Government guarantees any returns on insurance products, or is a source of payment of any insurance obligation of or sold by any person.  [Source: §626.9541(1)(a)]



False Information and Advertising Generally §626.9541(1)(a)(9)(b)

Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing to be made, published, disseminated, circulated, or placed before the public: 

· In a newspaper, magazine, or other publication,

· In the form of a notice, circular, pamphlet, letter, or poster,

· Over any radio or television station, or

· In any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading.



Defamation §626.9541(1)(a)(9)(c)

Knowingly making, publishing, disseminating, or circulating or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of, any oral or written statement, pamphlet, circular, article, or literature, the information of which is false or maliciously critical of, or derogatory to, any person and calculated to injure the person.

Unfair Stock Operations and Advisory Board Contracts §626.9541(1)(a)(9)(f)

The Unfair Stock Options and Advisory Board Contracts statute means to issue or deliver, agency company stock, other capital stock, benefit certificates, shares in any common-law corporation, securities, any advisory board contracts promising returns, or profits as an inducement to insurance.



Unfair Discrimination §626.9541(1)(a)(9)(g)


· Knowingly making or permitting unfair discrimination between individuals of the same actuarially supportable class and equal expectation of life, in the rates charged.

· Knowingly making or permitting unfair discrimination between individuals of the same actuarially supportable class, as determined at the original time of issuance of coverage, and essentially the same hazard, in the amount of premium, fees, or rates charged for a policy or contract of accident, disability, or health insurance.

· For a health, life insurer, or managed care provider to underwrite a policy, refuse to issue, reissue, renew, refuse to pay a claim, cancel or otherwise terminate a policy, or increase rates based on the fact the insured or applicant has made a claim, sought, or should have sought medical or psychological treatment in the past for abuse, protection from abuse, shelter from abuse, or filed a claim that was caused in the past by abuse and abuse might recur as a result of a future assault, battery, or sexual assault by a family or household member on another household member.


A health insurer, life insurer, disability insurer, or managed care provider may refuse to underwrite, issue, or renew a policy based on the applicant’s medical condition, but cannot consider whether such condition was caused by an act of abuse.

For purposes of this section, the term “abuse” means the occurrence of one or more of the following acts:

· Attempting or committing assault, battery, sexual assault, or sexual battery;

· Placing another in fear of imminent serious bodily injury by physical menace;

· False imprisonment;

· Physically or sexually abusing a minor child; or

· An act of domestic violence.



Unlawful Rebates §626.9541(1)(e)


· Except as otherwise expressly provided by law, or in an applicable filing with the office, knowingly:


Ž Permitting, offering to make, or making, a contract or agreement as a new or amended contract than that plainly expressed in the insurance issued contract;

Ž Offering to or paying, allowing, or giving as inducement to purchase an insurance contract, an unlawful rebate of premiums owed on the contract, a special favor or advantage in the dividends or other benefits (or any valuable consideration or inducement not specified in the contract);

Ž Offering to or giving, selling, or purchasing, as inducement in connection to purchasing an insurance contract, any stocks, bonds, securities of an insurance company or other corporation, association, or partnership, or any dividends or profits accrued, or anything of value not specified in the insurance contract.


· Nothing in the following can be construed as including within the definition of discrimination or unlawful rebates:


Ž In the case of any contract of life insurance or life annuity, paying bonuses to all policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance; provided that any such bonuses or abatement of premiums is fair and equitable to all policyholders and for the best interests of the company and its policyholders.

Ž In the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expenses.

Ž Readjustment of the rate of premium for a group insurance policy.

Ž Issuance of life insurance policies or annuity contracts at rates less than the usual rates of premiums for policies or contracts, as group insurance or employee insurance.

Ž Issuing life or disability insurance policies on a salary savings, bank draft, preauthorized check, payroll deduction, or other similar plan at a reduced rate reasonably related to the savings made by the use of such plan.


Unfair Claim Settlement Practices §626.9541(i)


· Attempting to settle claims on the basis of an application, when serving as a binder or intended to become a part of the policy, or any other material document which was altered without notice, knowledge or consent of the insured;

· A material misrepresentation made to an insured or any other person having an interest in the proceeds payable under a contract, for the purpose and with the intent of effecting settlement of claims, loss, or damage under the contract or policy on less favorable terms than those provided in the contract; or

· Committing or performing with enough frequency to indicate a pattern, the following:

· Failing to adopt and implement standards for proper investigation of claims

· Misrepresenting pertinent facts or insurance policy provisions relating to coverages

· Failing to acknowledge and act promptly on communications with respect to claims

· Denying claims without conducting reasonable investigations based on available information

· Failing to affirm or deny full or partial coverage of claims, and, as to partial coverage, the amount or extent of coverage, or at the written request of the insured (within 30 days after proof-of-loss statements have been completed), failing to provide a written response stating the claim is being investigated;

· Failing to promptly provide a reasonable written explanation to the insured, where in the policy is support for denial of a claim or offer of a compromise settlement;

· Failing to promptly notify the insured of any additional information necessary to process a claim;

· Failing to clearly explain the nature of requested information and reasons why the information is necessary;

· Failing to pay personal injury protection insurance claims within the time period required by statute. The office may order the insurer to pay restitution to a policyholder, medical provider, or other claimant, including interest at a rate consistent with the amount set by statute (§55.03(1) Rate of Interest: Interest on judgments is set quarterly by the CFO on the first of each January, April, July and October), for the time period within which an insurer fails to pay claims as required by law. Restitution is in addition to  law. Restitution is in addition to any other penalties allowed by law, including, suspension of the insurer’s certificate of authority.


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