Unfair Trade Practices

Oregon has adopted comprehensive unfair trade practices regulations under ORS Chapter 746.

Unfair Insurance Trade Practices

Oregon prohibits various unfair or deceptive practices in the insurance industry.

Undefined Trade Practices (ORS 746.240)

No person shall engage in Oregon in any trade practice that is found by the Director of DFR to be:

• An unfair or deceptive act or practice
• In the transaction of insurance
• Injurious to the insurance-buying public

This applies even if the practice is not expressly defined and prohibited in the Insurance Code.

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

Oregon 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 (ORS 746.045)

Rebating is offering inducements not specified in the policy to purchase insurance:

Prohibition on Rebates

Under ORS 746.045:

• No person shall permit, offer to make, or make any contract of insurance
• Unless all agreements or understandings by way of inducement are plainly expressed in the policy issued

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
• Any valuable consideration not specified in policy

Related Prohibitions

Limited Exceptions

Oregon allows:

• Dividends specified in policy
• Legitimate marketing items of nominal value
• Group premium discounts
• Premium financing arrangements

Exam Tip: Rebating is generally prohibited under ORS 746.045. All inducements must be plainly expressed in the policy.

Twisting and Churning

Twisting

Twisting is misrepresenting the terms of an existing policy to induce replacement:

• 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

Unfair Claims Settlement Practices (ORS 746.230)

Oregon has guidelines for fair claims handling:

Prohibited Practices

Insurers cannot engage in unfair claim settlement practices:

• Misrepresent policy provisions to claimants
• Fail to acknowledge claims promptly
• Fail to communicate claim decisions
• Deny claims without reasonable investigation
• Offer substantially less than reasonable value
• Delay payment to force settlement

Administrative Rules (OAR 836-085-0045)

Failure to comply with certain rules constitutes an unfair trade practice:

• Cancellation and notice rule violations
• Midterm premium increases in violation of rules
• Coverage reductions attempted improperly
• Block cancellations presumed unfairly discriminatory

Insurance Industry and UTPA

Oregon's Unlawful Trade Practices Act (UTPA) history with insurance:

• Insurance industry has historically enjoyed an exemption from UTPA
• Consumer advocates have sought to bring insurers under UTPA
• UTPA (ORS 646.605-646.656) protects consumers from deceptive practices
• Allows civil actions for prohibited acts

Unfair Discrimination

Oregon prohibits unfair discrimination in insurance:

Prohibited Practices

What IS Permitted

Risk-based underwriting using:

• Age
• Health history
• Claims history
• Occupation
• Lifestyle factors (smoking, hazardous activities)