Key Takeaways
- Maine Revised Statutes Title 24-A prohibits unfair methods of competition and deceptive practices
- Rebating is generally prohibited in Maine 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
Maine Revised Statutes Title 24-A 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
Maine 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
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
Maine 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 Maine. 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
Maine 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 reasonable time after proof of loss |
| Pay undisputed amounts | Promptly after settlement |
Unfair Discrimination
Maine 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)
Maine Specific: Maine follows the NAIC model unfair trade practices act with state-specific provisions under Title 24-A.
Which of the following is generally PERMITTED in Maine insurance sales?
What is the definition of twisting?