Key Takeaways
- Alaska Statute 21.36 prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is generally prohibited in Alaska with limited exceptions
- Twisting and churning are prohibited practices subject to license revocation
- Tied sales (linking insurance purchase to other transactions) are prohibited
- Unfair discrimination based on protected characteristics is prohibited
Unfair Trade Practices
Alaska Statute 21.36 (Trade Practices and Frauds) regulates acts or trade practices in the business of insurance in accordance with the McCarran-Ferguson Act and Gramm-Leach-Bliley Act by defining practices that constitute unfair methods of competition or unfair or deceptive acts and prohibiting them.
Misrepresentation
Producers and insurers are prohibited from:
False Statements
- Making false statements about policy terms or benefits
- Misrepresenting the financial condition of an insurer
- Using misleading policy illustrations
- Making false statements about competitors
- Misrepresenting the nature of the insurance transaction
Examples of Misrepresentation
| Prohibited Statement | Why It's Misrepresentation |
|---|---|
| "This policy covers everything" | No policy covers all losses |
| "Your rates will never increase" | Rates can and do change |
| "This company is the largest" | If not true, it's false |
| "You must buy today" | False urgency |
False Advertising
Alaska prohibits deceptive insurance advertising:
- Ads must be truthful and not misleading
- Must clearly identify as insurance advertisement
- Cannot use testimonials that are not genuine
- Cannot imply government endorsement
- Must include insurer's name
Social Media Rules
- Same standards apply to social media
- Must be clear it's an advertisement
- Cannot make claims that can't be substantiated
- Producer must be identified
Rebating
Rebating is offering inducements not specified in the policy to purchase insurance:
What Is Prohibited Under AS 21.36.120
- Returning part of premium to insured
- Offering gifts or prizes of significant value
- Paying for referrals to individuals
- Sharing commission with non-licensed persons
- Providing special favors or valuable consideration
What the Insured Cannot Do
An insured named in a policy, or an employee of the insured may not knowingly receive or accept directly or indirectly:
- A rebate, discount, abatement, credit, or reduction of premium
- Special favor or advantage
- Valuable consideration or inducement
Limited Exceptions
Alaska allows:
- Payment of commissions to properly licensed persons
- Lawful dividends, savings, or unabsorbed premium deposits to participating policyholders
- Legitimate marketing items of nominal value (pens, calendars)
- Group premium discounts
Exam Tip: Rebating is generally prohibited in Alaska. Remember the limited exceptions for licensed commissions and nominal value items.
Twisting
Twisting (AS 21.36.050) is making misrepresentations to induce replacement of existing insurance:
Examples of twisting:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Tied Sales Prohibited
The sale of insurance may not be tied to another transaction:
- Lender cannot require insurance from a specific agent
- Cannot condition loans on insurance purchase
- Cannot bundle insurance with unrelated products
Unfair Claims Practices
Alaska requires insurers to handle claims fairly and promptly under the Unfair Claims Settlement Acts or Practices regulations:
Prohibited Practices
- Misrepresenting policy provisions to claimants
- Failing to acknowledge claims promptly
- Failing to communicate claim decisions
- Denying claims without reasonable investigation
- Offering substantially less than reasonable value
- Delaying payment to force settlement
- Requiring excessive documentation
Unfair Claims Settlement Acts
- Unreasonable claim denial
- Failure to act promptly on claims
- Misrepresenting coverage to claimants
- Offering less than what is owed under the policy
Unfair Discrimination
Alaska prohibits unfair discrimination in insurance under AS 21.36.090 and AS 21.36.120:
What Is Prohibited
An insurer may not make or permit unfair discrimination:
- Between insureds or property having like insuring or risk characteristics
- In the premium or rates charged for insurance
- In the dividends or other benefits payable
- In any other terms and conditions of the insurance
Example of Fair vs. Unfair Discrimination
| Fair Discrimination | Unfair Discrimination |
|---|---|
| Refusing ALL drivers with DUI | Refusing SOME drivers with DUI while accepting others |
| Higher rates for smokers | Different rates for same-risk individuals |
| Risk-based underwriting | Arbitrary treatment of similar risks |
What IS Permitted
Risk-based underwriting using:
- Age
- Health history
- Claims history
- Occupation (with limitations)
- Lifestyle factors (smoking, hazardous activities)
Which of the following is generally PERMITTED in Alaska insurance sales?
What Alaska statute governs unfair trade practices in insurance?
Under Alaska law, can a lender require you to purchase insurance from a specific agent as a condition of a loan?