Ethical Principles for Advertising & Direct Mail
As with all customer communications, the primary ethical consideration for advertising and direct mail is that it not be misleading to the reader or viewer. This requires the agent to present the material in a way that is not only honest, but also understandable. The agent should consider the level of understanding of the target audience — an agent’s deliberate use of complex, albeit truthful, information in the mass media could be considered deceptive because of the target audience’s lack of sophistication.
The principal ethical difficulty with respect to direct mail and advertising is its relative brevity. It is often impossible to make a full disclosure in a piece of direct mail or in an advertisement. Since the advertising or direct mail used must be brief as well as capable of generating prospective client interest, it is particularly important that care be taken to ensure that the agent not misrepresent either the product or himself.
Tax Language: Terms such as “tax-free,” “tax-favored,” or “tax-advantaged” should not be used without additional qualifying language inviting the reader to check with their tax adviser for applicability in their specific situation.
Because full disclosure is generally impractical in advertising and direct mail, specific product discussion should usually be avoided. Unless a product or feature can be explained completely, the communication runs a good chance of misleading the reader.
Specific Florida Laws — §626.9541
Florida law specifically outlaws misleading or false advertising under §626.9541(a) and (b):
Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:
1.Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
2.Misrepresents the dividends or share of the surplus to be received on any insurance policy.
3.Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy.
4.Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates.
5.Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof.
6.Is a misrepresentation for the purpose of inducing the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy.
7.Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy.
8.Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company.
9.Uses any advertisement that would mislead a reasonable person to believe mistakenly that the state or Federal Government is responsible for the insurance sales activities of any person or stands behind any person’s credit.
Knowingly making, publishing, disseminating, circulating, or placing before the public any advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance which is untrue, deceptive, or misleading — in a newspaper, magazine, notice, circular, pamphlet, letter, poster, over any radio or television station, or in any other way.
For regulations on life insurance advertisements refer to Rule 69B-150.
Definition of “Advertisement”
The definition of advertisement covers a broad range of marketing media designed to solicit insurance business, including:
- Printed or published literature used by or on behalf of an insurer
- Audio-visual presentations, including radio and television broadcasts
- Direct mail pieces, brochures, pamphlets, circulars
- Billboards and other displays
- Prepared sales talks, presentations, and announcements
- Materials used for employee/agent training purposes
- Materials and communications designed for exclusive internal use
- Individual communication with existing policyholders concerning existing coverage (note: communications for renewal or expansion of coverage are considered advertising)
- Announcements by group policyholders to eligible participants
- Correspondence with a group policyholder as part of negotiation of a group contract
- Court-approved materials sent under a court order
Compliance Requirements
An insurance company is responsible for any advertisement that directly or indirectly benefits the company — whether placed directly by the company or by agents, brokers, or others on the company’s behalf.
Department regulations require insurers to print an identifying form number on each individual marketing piece. Insurers must keep a file, for four years, of all printed advertisements of its individual policies and samples of group insurance advertisements. The company must note the manner and extent of its distribution in Florida.
The Department may also require insurers to file advertisements 30 days before first use. The Department currently requires 30-day prior approval of any advertisement by radio, television and cable broadcasts that will be distributed to more than 25% of Florida’s population.
Types of Advertisements
Department regulations classify advertisements in three ways:
- All statements regarding policy dividends must clearly state that dividends are not guaranteed
- Agents and companies may provide applicants with gifts valued up to $100 for advertising purposes. Gifts are defined as “articles of merchandise” — gift certificates, memberships, or cash are not permitted
- Advertisements must not contain disparaging comments when comparing competing policies; comparisons must be between policies of equal terms and conditions
- Endorsements and testimonials must be genuine and current; paid endorsements must be labeled as such
- When using statistics, the ad must reveal the source and the policy to which they apply
- Terms like “introductory,” “initial,” or “special” are only permitted if rates, provisions, or benefits will change substantially in the future
- Advertisements must not imply government approval or use names or logos deceptively similar to any government agency
- Direct mail may not use phrases such as “no salesperson will call” or “by eliminating the agent we can offer at a lower cost”