Deceptive Sales Practices in the Life Insurance Industry

Deceptive sales practices can happen in a variety of lines of insurance, from auto to homeowners, health, life and worker’s compensation. Regardless of the type of business or agency, there are certain legal standards to follow to avoid getting ripped off by unscrupulous companies or agents.

A company or agency that engages in unfair, deceptive, or fraudulent methods to obtain business is guilty of unlawful conduct under the Ohio Consumer Sales Practices Act (13-11a-3). Examples of this include: false advertising, bait-and-switch, and offering a free prize or gift with a purchase.

In order to determine whether an act or practice is deceptive, the Agencies look at the context of the entire advertisement, transaction, or course of dealing. It also considers whether a reasonable consumer could be misled under the circumstances.

Generally, if the list price is not being followed by other retailers in the same area, it is not a good idea to advertise a reduction from the list price. The reason is that the list price is an indicator of the exact prices at which articles are sold at retail. However, the lack of dependability of this indicator has increased over time as a result of the proliferation of retail discounting.

If, on the other hand, the list price is being followed by a substantial number of principal retail outlets in the same area, it is not dishonest for an advertiser to represent that his reduced price does not appreciably exceed the highest price at which substantial sales of the article are made in that area. This is because a consumer would likely be inclined to view a price reduction as a genuine bargain or saving if the former price was not actually sold in the area.

This paper focuses on five specific areas of deceptive sales practices in the life insurance industry: a) price-related representations about the price of protection and the rate of return on the savings element of a cash-value life insurance contract; b) bait-and-switch techniques; c) selling a product unfit for the purpose it is being sold; d) failing to disclose material limitations or conditions in an offer; and e) a failure to deliver on a promise. It also explains why these practices are a problem in the life insurance industry and suggests ways to reduce the likelihood of them occurring.

Bait-and-switch tactics are illegal because they are misleading and deceptive, even if the salesperson was not aware of the tricks involved. The law says a bait-and-switch occurs when the seller offers to sell a product for one price but then tries to sell it at a different price later without the buyer’s permission.

The Bureau’s recent case against Sunday Riley is an example of a deceptive sales practice that involves posters on a website. The posters were paid by the company to post reviews about its products and services, but did not necessarily provide unbiased information.

Deceptive sales are a serious problem in the security industry and should be addressed as soon as possible. They hurt the reputation of the industry, and undermine consumers’ trust in their security provider. They also put the health and safety of families at risk.