Key Takeaways
- Louisiana Revised Statutes Title 22 prohibits unfair methods of competition and deceptive practices
- Rebating is generally prohibited in Louisiana with limited exceptions
- Twisting and churning are prohibited practices subject to license revocation
- Insurers must handle claims in good faith within specified timeframes
- Unfair discrimination based on protected characteristics is prohibited
Unfair Trade Practices
Louisiana Revised Statutes (LA R.S.) Title 22 regulates trade practices in the business of insurance, prohibiting unfair methods of competition and unfair or deceptive acts.
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 best" | If not substantiated, it's false |
| "You must buy today" | False urgency |
False Advertising
Louisiana 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
- Returning part of premium to insured
- Offering gifts or prizes of significant value
- Paying for referrals to individuals
- Sharing commission with non-licensed persons
Limited Exceptions
Louisiana allows certain exceptions:
- Premium financing arrangements
- Dividends specified in policy
- Legitimate marketing items of nominal value (pens, calendars)
- Group premium discounts based on experience
Exam Tip: Rebating is generally prohibited in Louisiana. Items of nominal value are permitted.
Twisting and Churning
Twisting
Making misrepresentations to induce replacement of existing insurance:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Excessive replacement of policies to generate commissions:
- Multiple replacements for same client
- Pattern of replacements in book of business
- Ignoring client's best interests
- Creating new surrender charge periods
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning, fine, or suspension |
| Repeat offense | License revocation |
| Consumer harm | Restitution required |
| Criminal conduct | Criminal prosecution |
Unfair Claims Practices
Louisiana requires insurers to handle claims fairly and promptly:
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
Claim Handling Timeframes
| Action | Timeframe |
|---|---|
| Acknowledge claim | Promptly after receipt |
| Request additional information | Reasonable time |
| Accept or deny claim | Within 30 days after proof of loss |
| Pay undisputed amounts | Promptly after settlement |
Unfair Discrimination
Louisiana prohibits unfair discrimination in insurance:
What IS Prohibited
| Protected Class | Prohibition |
|---|---|
| Race | Cannot discriminate in any manner |
| Religion | Cannot discriminate based on religion |
| National Origin | Cannot discriminate based on national origin |
| Sex | Cannot discriminate solely based on sex |
| Genetic Information | Cannot use genetic testing results unfairly |
What IS Permitted
Risk-based underwriting using:
- Age
- Health history
- Claims history
- Occupation (with limitations)
- Lifestyle factors (smoking, hazardous activities)
Louisiana Specific: Louisiana follows the NAIC model unfair trade practices act with state-specific provisions under LA R.S. Title 22.
Which of the following is generally PERMITTED in Louisiana insurance sales?
What is the definition of twisting?