Key Takeaways
- Ohio Revised Code Section 3901.21 prohibits unfair and deceptive trade practices
- Rebating is prohibited in Ohio, with limited exceptions for permitted inducements
- Twisting and churning are prohibited practices subject to license revocation and fines
- Insurers must handle claims in good faith within specified timeframes
- Unfair discrimination based on protected characteristics is prohibited
Unfair Trade Practices
Ohio Revised Code Section 3901.21 prohibits various unfair or deceptive practices in the 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 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
Ohio 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
Digital and Social Media
- Same standards apply to digital advertising
- 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
Ohio allows:
- Dividends specified in policy
- Legitimate marketing items of nominal value
- Group premium discounts where permitted
- Value-added services disclosed in policy
Exam Tip: Rebating is generally prohibited in Ohio. Remember the limited exceptions for nominal value items.
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 |
| Per violation | Up to $25,000 fine |
| Consumer harm | Restitution required |
Unfair Claims Practices
Ohio 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 Requirements
Ohio law requires insurers to:
| Action | Requirement |
|---|---|
| Acknowledge claim | Promptly upon receipt |
| Investigate | Within reasonable time |
| Communicate decision | In writing |
| Pay claims | Within 30 days of settlement |
Bad Faith
If an insurer acts in bad faith, policyholders may recover:
- Policy benefits owed
- Consequential damages
- Punitive damages in egregious cases
- Attorney's fees
Unfair Discrimination
Ohio prohibits unfair discrimination in insurance:
Protected Characteristics
| Protected | Cannot Discriminate Based On |
|---|---|
| Race | Prohibited |
| Color | Prohibited |
| Religion | Prohibited |
| National Origin | Prohibited |
| Disability | With limitations |
| Genetic Information | Prohibited (GINA) |
What IS Permitted
Risk-based underwriting using:
- Age (life insurance)
- Health history
- Claims history
- Occupation (with limitations)
- Lifestyle factors (smoking, hazardous activities)
What is the maximum fine per violation for unfair trade practices in Ohio?
Which of the following is generally PERMITTED in Ohio insurance sales?