Deceptive Sales in the Insurance Industry

Deceptive sales are a serious problem in the insurance industry, and consumers who purchase fraudulent products or policies can end up wasting their money and putting their family’s safety and security at risk. They also put a bad name on the insurance business and undermine consumer confidence in this industry.

To be deceptive, there must be a representation, omission or practice that misleads or is likely to mislead the consumer. A representation must be in the form of express or implied claims, promises or terms and conditions that are material to the consumer’s decision whether to buy or not to buy.

One of the most common types of deceptive sales involves using bait-and-switch techniques to lure prospective customers into buying a product that is either sold out or disparaged when the customer arrives at the store. This technique can take many forms, but often the result is that a customer pays more for an inferior product than they would have paid had they gone to the store to buy it from the company selling the original advertisement.

Another common type of deceptive sale involves the use of a “list price” ticket that is considerably greater than the usual selling price for the article in the advertiser’s trading area. For example, if the usual selling price for a pack of batteries is ninety-nine cents in the advertiser’s trade area, and the advertiser offers a discount on that same package, the manufacturer or retailer will not be able to claim that the advertised package was a bargain because the list price ticket is actually considerably higher than the usual selling price.

A third common deceptive sales tactic involves claiming that a particular product is “superior to others in its category.” This type of claim can be particularly problematic when it is made in comparison to a competitor’s product. The FTC has long required advertisers to collect and document quantitative evidence that their claim is true, but this requirement has not always been enforced.

The FTC has found that a number of other practices can constitute deceptive sales, including false cost or price claims, misleading representations of material limitations and conditions, offering a product that is not in fact available and failing to provide promised services. The FTC also has found that companies and their agents violate the law when they sell products or services that are unfit for the purpose for which they are sold, such as health and life insurance. Ultimately, the FTC will decide whether an act or practice is deceptive when it considers all the elements of the violation in light of the interests of the consumer.