Deceptive sales are the deliberate or reckless misrepresentation of consumer goods or services in a manner that misleads consumers. Often, these deceptive practices are conducted by employees of insurance companies or their agents in the course of a sale.
These deceptive practices, which are referred to as unfair and deceptive acts and practices under 49 U.S.C. 41712, can range from the use of bait-and-switch tactics to omissions of important information about products or services and the failure to deliver on promises to provide them.
The Agencies use a three-part test to determine whether an act or practice constitutes deceptive conduct: the representation, omission or practice must mislead the consumer; the consumers interpretation of the representation, omission or practice must be reasonable under the circumstances; and the representation, omission or practice must have a material impact on the consumer’s decision to purchase, accept or retain a product or service.
In evaluating whether an act or practice is deceptive, the Agencies consider the context of the advertisement, transaction, or course of dealing. The Agencies may also consider other factors that can make the act or practice deceptive, including the nature of the product or service, the characteristics of the consumers, the type of advertising, and the nature of the product’s labeling.
One example of a deceptive sales practice is the “bargain” offer for an article in which a reduction from the manufacturer’s list price is made. Many members of the public believe that a manufacturer’s list price is the price at which the product is generally sold, and therefore the advertiser’s offer of a reduction from this price may seem to be a genuine bargain. However, if the manufacturer’s list price is significantly in excess of the highest price at which substantial sales in the advertiser’s trade area are made, then the offer of a reduction from this price is likely to mislead consumers.
Another form of deceptive sales is the offering of an aggressive discount rate by a low-quality firm to compete against a high-quality firm. By intentionally making the current price appear to be a limited-time discount rate, the lower-quality firm creates an artificial decoy for its product that inflates the reference price in consumers’ minds.
The research in this paper suggests that these deceptive sales practices are rooted in the life insurance industry’s enduring structure and culture, and that they have the potential to corrode trust and undermine a mechanism of social solidarity. The analysis shows that deceptive sales enact the following social tendencies: fragmentation, individualism and the attenuation of family ties, responsibilization of the consumer, and downloading of regulatory responsibility from the state. These trends are in turn reinforced by the emergence of an increasingly flexible labour force, the erosion of social safety nets and a growing sense of “moral risk” in society.