Deceptive sales occur when companies or agents try to sell products or services that aren’t legitimate. They are a serious threat to the reputation of the insurance industry and can end up costing consumers hundreds or thousands of dollars in unpaid claims.
The Federal Trade Commission (FTC) and state attorneys general have sued many companies and individuals for fraudulent practices. These include high-pressure sales pitches, quick-change tactics and false promises.
These practices can be difficult to spot, but there are some steps you can take to protect yourself against the deception.
First, always use a licensed agent to purchase a policy. Look for a company with a good reputation and an excellent record of handling complaints. Be sure to ask about the insurance agent’s credentials and check them online before signing up.
You can also get a copy of your new policy before you buy. This will allow you to make sure that it matches what you had planned on. If it doesn’t, contact the company to find out why it’s not what you expected or was a scam.
Second, remember that a representation conveys two or more meanings to reasonable consumers and one meaning is misleading. This can be the basis for deception if a consumer’s interpretation or reaction indicates that an act or practice is deceptive under the circumstances, even if the consumer’s interpretation is not shared by a majority of the consumers in the relevant class.
Third, if an advertised price is significantly in excess of the highest price at which substantial sales in the advertiser’s trade area are made, the offer may be a deceptive practice. This is true even if the list price was set to encourage purchases by customers who were unlikely to purchase the product at the full advertised price.
Fourth, be careful when an advertised price is for a substantial period of time. This could lead to a case of fictitious pricing, which is deceptive under the FTC Act.
Fifth, be very careful when the offer includes material limitations or conditions that were not known to you at the time of the sale. This can be the basis for a deceptive practice, such as making a claim of a free upgrade without disclosing that the consumer’s current alarm system is not compatible with the wireless technology the offer is promoting.
Lastly, avoid high-pressure sales pitches from any agent or company. These tactics can be especially threatening if the sales rep is attempting to pressure you into making a decision quickly.
The FTC and state attorneys general have prosecuted many cases against deceptive sales practices in the life insurance industry. These practices include making false claims about the products’ financial worth and failing to disclose investment costs, fees and other hidden expenses. They have also been found to be deceptive under the FTC Act because they put consumers at risk for financial loss or injury.