Misrepresentation Continued

C4-L2-P15

Misrepresentation Continued

Giving the impression that policy dividends or cash value projections (other than those that are in fact guaranteed, as stated in the policy) are guaranteed.

Producers should be sure to distinguish between projections and guarantees, and make sure that clients understand the distinction.

Using inaccurate or misleading information or numbers that misrepresent the financial condition of an insurance company, a broker-dealer or another producer. When producers venture into discussions about a company’s financial stability, they must be sure to stick to the facts. The fact that a company is in receivership is public information; however, producers should use caution in explaining the ramifications of a company’s financial condition.

It is equally important not to spread rumors about another producer, agency or broker-dealer.

  • Making any statements or giving reassurances of any kind about coverage, the policy or premiums that are not true or that cannot be supported clearly by the policy. One of the most serious examples of this practice would be to tell an applicant that he or she is insured when this is not the case or coverage is only conditional.

  • Engaging in the most serious type of misrepresentation—intentional fraud. This criminal act can lead to a fine and loss of license, possibly even criminal proceedings. The agency, manager, broker-dealer and home office may be held liable as well. This is why it is important for producers to make sure they remain within the legal limits of their state laws, as well as their companies’ ethical guidelines.

Misrepresentation accounts for the majority of complaints insurers and regulatory agencies receive.

In most cases, this misrepresentation is not intentional. For example, a client might not completely understand a producer’s explanation because the producer could not define certain industry terms. Most of these misrepresentations result from inexperience, lack of knowledge, or just plain carelessness - all of which can harm clients and damage the credibility of the producer, the company and the industry. These are the reasons why it is so important for producers to know their products and sales materials and be able to present and explain them clearly.

It is critical for producers to be able to determine whether their clients completely understand what they have been told and are making informed decisions in purchasing products.