Key Takeaways
- Nevada has adopted the Unfair Trade Practices Act under NRS Chapter 686A
- Rebating is prohibited under Nevada law with limited exceptions (NRS 686A.110, 686A.130)
- Twisting is specifically prohibited under NRS 686A.050
- The Commissioner of Insurance has enforcement authority
- Insurers must handle claims fairly and promptly under NRS 686A.310
Unfair Trade Practices
Nevada has adopted comprehensive unfair trade practices regulations under NRS Chapter 686A (Trade Practices and Frauds).
Unfair Insurance Trade Practices Act
Nevada prohibits various unfair or deceptive practices in the insurance industry.
Misrepresentation
Producers and insurers are prohibited from:
- 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
False Advertising
Nevada 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 (NRS 686A.110, 686A.130)
Rebating is offering inducements not specified in the policy to purchase insurance:
What Is Prohibited
For life insurance, annuities, and health insurance (NRS 686A.110):
- Returning part of premium to insured
- Offering gifts or prizes of significant value
- Paying for referrals to individuals
- Sharing commission with non-licensed persons
For property, casualty, surety, and title insurance (NRS 686A.130):
- No rebate, discount, or abatement of premium
- No special favor or advantage in dividends
- No valuable consideration not specified in policy
Limited Exceptions
Nevada allows:
- Dividends specified in policy
- Legitimate marketing items of nominal value
- Group premium discounts
- Premium financing arrangements
Penalties (NRS 686A.140)
Any person violating rebating provisions is guilty of a misdemeanor.
Exam Tip: Rebating is generally prohibited in Nevada. Violations are misdemeanors under NRS 686A.140.
Twisting (NRS 686A.050)
Definition
Twisting is making misleading statements to induce replacement of insurance:
No person shall make or issue any written or oral statement:
- Misrepresenting policy terms, conditions, benefits, or advantages
- Making misleading comparisons of policies
- For the purpose of inducing any person to lapse, forfeit, surrender, or replace insurance
Prohibited Actions
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Churning is excessive replacement to generate commissions:
- Multiple replacements for same client
- Pattern of replacements in producer's book
- 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 |
Claims Handling Requirements (NRS 686A.310)
Nevada has guidelines for fair claims handling:
Unfair Practices in Settling Claims
Insurers cannot:
- Misrepresent policy provisions to claimants
- Fail to acknowledge claims promptly
- Deny claims without reasonable investigation
- Offer substantially less than reasonable value
- Delay payment to force settlement
- Fail to settle promptly when liability is clear
Insurer Liability
An insurer is liable for any damages sustained by an insured as a result of the commission of unfair practices in settling claims.
Unfair Discrimination
Nevada prohibits unfair discrimination in insurance:
Prohibited Practices
| Practice | Prohibition |
|---|---|
| Race | Cannot discriminate based on race |
| Religion | Cannot discriminate based on religion |
| National Origin | Cannot discriminate based on national origin |
| Disability | Cannot discriminate based on disability (with limitations) |
What IS Permitted
Risk-based underwriting using:
- Age
- Health history
- Claims history
- Occupation
- Lifestyle factors (smoking, hazardous activities)
Under which NRS chapter does Nevada regulate unfair trade practices in insurance?
What is the penalty for violating rebating provisions in Nevada?
Which of the following is generally PERMITTED in Nevada insurance sales?
What is twisting under Nevada insurance law (NRS 686A.050)?
What can an insurer be liable for under Nevada claims handling rules?