Unfair Methods of Competition & Deceptive Acts
The purpose of chapter 69B-151.201 is to implement the provisions of Unfair Methods of Competition and Unfair or Deceptive Acts or Practices, with respect to churning and to adopt Form OIR-D0-1180. This rule applies to all types of policies that include a value feature, irrespective of the marketing method by which such policies or contracts are sold.
Selling annuities requires the use of state-required forms: the Annuity Suitability Questionnaire and the Disclosure and Comparison of Annuity Contracts. This rule applies exclusively to any recommendation to purchase or exchange an annuity contract made to a senior consumer (age 65 or older) by an insurance agent or insurer. In a joint purchase or exchange, if any party is 65 or older, the joint purchasers are considered to be senior consumers. Senate Bill 166 requires the same treatment be given to all annuity purchasers. [Chapter 69B-162.011]
“Person” means any individual, corporation, association, partnership, reciprocal exchange, interinsurer, Lloyds insurer, fraternal benefit society, or business trust or any entity involved in the business of insurance. [626.9511(1)]
“Insurance policy” or “insurance contract” means a written contract of, or a written agreement for or effecting, insurance, or the certificate thereof, by whatever name called, and includes all clauses, riders, endorsements, and papers which are a part thereof. [626.9511(2)]
Any person who violates a cease and desist order of the department or office while such order is in effect, after notice and hearing, shall be subject to any one or more of the following:
- A monetary penalty of not more than $50,000 as to all matters determined in such hearing
- Suspension or revocation of such person’s certificate of authority, license, or eligibility to hold such certificate of authority or license
- Such other relief as may be provided in the insurance code
Unfair Practices — Penalties
In Florida you cannot engage in trade practices defined as an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance. Those committing such acts subject themselves to severe financial penalties. [Source: §626.9521(1)]
| Violation Type | Fine Per Violation | Aggregate Cap |
|---|---|---|
| Non-willful violation | Up to $5,000 | $20,000 (same action) |
| Willful violation | Up to $40,000 | $200,000 (same action) |
| Twisting or churning (non-willful) | Up to $5,000 + misdemeanor 1st degree | — |
| Twisting or churning (willful) | Up to $75,000 + misdemeanor 1st degree | — |
| Fraudulent signatures (non-willful) | Up to $5,000 | — |
| Fraudulent signatures (willful) | Up to $75,000 + 3rd degree felony | — |
| Administrative fines — non-willful (same action) | — | $50,000 |
| Administrative fines — willful (same action) | — | $250,000 |
Unfair & Deceptive Acts — Statute 626.9541
Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:
- Misrepresents the benefits, advantages, conditions, or terms of any insurance policy
- Misrepresents the dividends or share of the surplus to be received on any insurance policy
- Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy
- Is misleading or a misrepresentation as to the financial condition of any person or as to the legal reserve system on which any life insurer operates
- Uses any name or title of any insurance policy misrepresenting its true nature
- Is a misrepresentation for the purpose of inducing the lapse, forfeiture, exchange, conversion, or surrender of a policy
- Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy
- Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company
- Uses any advertisement that would cause a reasonable person to believe mistakenly that Florida or the Federal Government is responsible for the insurance sales activities of any person, or guarantees any returns on insurance products
Knowingly making, publishing, disseminating, or circulating, before the public in a newspaper, magazine, publication, notice, circular, pamphlet, letter, poster, radio or television station, or in any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance which is untrue, deceptive, or misleading. [§626.9541(1)(a)(9)(b)]
Knowingly making, publishing, disseminating, or circulating any oral or written statement, pamphlet, circular, article, or literature, the information of which is false or maliciously critical of, or derogatory to, any person and calculated to injure the person. [§626.9541(1)(a)(9)(c)]
Issuing or delivering agency company stock, other capital stock, benefit certificates, shares in any common-law corporation, securities, or any advisory board contracts promising returns or profits as an inducement to insurance. [§626.9541(1)(a)(9)(f)]
- Knowingly making or permitting unfair discrimination between individuals of the same actuarially supportable class and equal expectation of life, in the rates charged
- Knowingly making or permitting unfair discrimination between individuals of the same actuarially supportable class and essentially the same hazard, in the amount of premium, fees, or rates charged for accident, disability, or health insurance
- For a health or life insurer or managed care provider to underwrite, refuse to issue, reissue, renew, refuse to pay a claim, cancel, or increase rates based on the fact the insured or applicant has made a claim or sought treatment for abuse, or filed a claim caused by abuse
Except as otherwise expressly provided by law, knowingly permitting, offering to make, or making any contract, or offering to pay or paying, allowing, or giving as an inducement to purchase an insurance contract:
- An unlawful rebate of premiums owed on the contract
- A special favor or advantage in the dividends or other benefits not specified in the contract
- Any stocks, bonds, securities, or anything of value not specified in the insurance contract
Note: The following are not considered unlawful rebates: paying bonuses to all policyholders out of surplus; allowing savings on industrial debit plan policies; readjustment of group insurance premiums; issuing group or employee insurance at reduced rates; or issuing policies on a salary savings, bank draft, or payroll deduction plan at a reduced rate reasonably related to the savings made. [§626.9541(1)(e)]
The following constitute unfair claim settlement practices when committed with enough frequency to indicate a pattern:
- Attempting to settle claims on the basis of an application or material document which was altered without notice, knowledge, or consent of the insured
- Making a material misrepresentation to an insured for the purpose of effecting settlement of claims on less favorable terms than those provided in the contract
- Failing to adopt and implement standards for proper investigation of claims
- Misrepresenting pertinent facts or insurance policy provisions relating to coverages
- Failing to acknowledge and act promptly on communications with respect to claims
- Denying claims without conducting reasonable investigations based on available information
- Failing to affirm or deny full or partial coverage within 30 days after proof-of-loss statements have been completed
- Failing to promptly provide a reasonable written explanation in support of denial of a claim or offer of a compromise settlement
- Failing to promptly notify the insured of any additional information necessary to process a claim
- Failing to pay personal injury protection insurance claims within the time period required by statute