Key Takeaways
- The New York Insurance Law prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is prohibited in New York with no exceptions for producers
- Twisting and churning are prohibited practices subject to license revocation and fines
- New York requires insurers to acknowledge claims within 15 business days
- Unfair discrimination in underwriting is prohibited except for actuarially justified factors
Unfair Trade Practices
The New York Insurance Law prohibits various unfair or deceptive practices in the P&C insurance industry.
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 insurance transactions
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 is the only policy you need" | May not be true |
| "You must buy today or lose rate" | False urgency |
| "NYPIUA coverage is the same as standard" | Coverage is more limited |
False Advertising
New York 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
- Cannot guarantee claims payment beyond policy terms
Rebating
Rebating is strictly prohibited in New York:
Prohibited
- Returning part of premium to insured
- Offering gifts of substantial value to induce purchase
- Paying for referrals to unlicensed individuals
- Sharing commission with non-licensed persons
- Offering any inducement not in the policy
No Exceptions
Unlike some states that allow limited rebating, New York has no exceptions for producers.
Exam Tip: Remember that New York has NO rebating exceptions. This is often tested.
Twisting and Churning
Twisting
Making misrepresentations to induce replacement:
- Falsely claiming existing policy is inadequate
- Misrepresenting policy 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
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning to suspension |
| Per violation | Up to $5,000 fine |
| Pattern of violations | License revocation |
| Consumer harm | Restitution required |
Unfair Claims Practices
New York has specific claims handling requirements:
Claims Timeline Requirements
| Action | Timeframe |
|---|---|
| Acknowledge claim | 15 business days |
| Begin investigation | Promptly |
| Accept or deny claim | 30 days after investigation complete |
| Pay claims | 10 business days after settlement |
Prohibited Claims 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
- Not attempting good faith settlement when liability clear
Unfair Discrimination
New York prohibits unfair discrimination in P&C insurance:
Prohibited Basis
Insurers cannot discriminate based on:
- Race
- Color
- Creed or religion
- National origin
- Disability
- Sexual orientation
- Gender identity
Permitted Underwriting Factors
- Driving record (auto)
- Claims history
- Property condition
- Location (with actuarial justification)
- Age of structure
- Safety features
Within how many business days must a New York insurer acknowledge receipt of a P&C claim?
Are there any rebating exceptions for New York insurance producers?