Deceptive sales in the life insurance industry undermine the trust that consumers place in the insurance industry and the products it sells. They can also lead to financial losses for the consumer, who may end up wasting money and time.
A common way in which deceptive sales occur is by omitting information or material limitations from an offer of insurance. This is often done by sales agents in an attempt to make the product appear more attractive than it really is, or to encourage consumers to buy more than they can afford.
These practices are illegal and can result in fines for the insurer and criminal charges for the individuals involved. The National Association of Insurance Commissioners (NAIC) urges consumers to take steps to avoid deceptive sales in all lines of insurance, including auto, homeowners, health and life.
The NAIC’s website provides an overview of the types of deceptive sales that can occur and some ways to prevent them. It also outlines the laws that govern them and how they work.
Advertising retail prices which have been established or suggested by manufacturers and other nonretail distributors is not deceptive if the list price or suggested retail price does not appreciably exceed the price at which substantial sales of the article are being made in the area. Moreover, it is not dishonest to advertise a reduction from the list price or suggested retail price of an article if a number of the principal retail outlets in the area are regularly engaged in selling the same article at that reduced price.
Advertising a former price is not deceptive if the latter price is one at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of the advertiser’s business, honestly and in good faith, and at a price – and not just an alleged higher price – that would have been expected to attract a considerable amount of attention from the general purchasing public in the trade area. The implication that the former price was for sale, not simply for asking, is particularly important and should be scrupulously avoided.
A representation conveys two or more meanings to reasonable consumers, and one of those meanings is misleading. Nevertheless, the interpretation or reaction of a significant minority of such consumers is misleading. The Agencies will evaluate the entire advertisement, transaction or course of dealing to determine whether it is deceptive under the circumstances.
A salesperson who has knowledge that is not readily available to the public should answer all questions truthfully and without deception or omission. If, however, she lacks sufficient knowledge to answer a particular question, she should explain her limited knowledge.
This is especially true when a product has features or benefits which cannot be fully explained by its manufacturer. In these cases, the salesperson should explain to the customer why the product is not fully explained by the manufacturer, and should not claim that the product’s features or benefits are fully explained by the company.