Key Takeaways
- Pennsylvania's Unfair Insurance Practices Act prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is prohibited in Pennsylvania with limited exceptions
- Twisting and churning are prohibited practices subject to license revocation and fines
- Pennsylvania has specific timelines for claims handling and acknowledgment
- Unfair discrimination in underwriting is prohibited except for actuarially justified factors
Last updated: January 2026
Unfair Trade Practices
Pennsylvania's Unfair Insurance Practices Act (40 P.S. § 1171.1 et seq.) 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 |
| "You don't need more coverage" | May not be adequate |
| "Limited tort is always better" | Depends on individual situation |
| "You must buy today" | False urgency |
False Advertising
Pennsylvania prohibits deceptive insurance advertising:
Advertising Requirements
- Ads must be truthful and not misleading
- Must clearly identify as insurance advertisement
- Cannot use false testimonials
- Cannot imply government endorsement
- Must include insurer's name
- Cannot guarantee claims payment beyond policy terms
Prohibited Advertising Practices
- Bait and switch tactics
- Misleading statistics or claims
- False comparisons to competitors
- Undisclosed material limitations
- Fake endorsements or testimonials
Rebating
Rebating is offering inducements not specified in the policy:
Prohibited
- Returning part of premium to insured
- Offering gifts of substantial value
- Paying for referrals to unlicensed individuals
- Sharing commission with non-licensed persons
- Offering anything of value to induce purchase
Permitted
- Premium financing arrangements
- Legitimate filed discounts
- Marketing items of nominal value
- Dividends specified in policy
- Group discounts properly filed
Twisting and Churning
Twisting
Making misrepresentations to induce replacement:
- Falsely claiming existing policy is inadequate
- Misrepresenting policy values or benefits
- Hiding costs of replacement
- Exaggerating benefits of new policy
- Not disclosing surrender charges
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
- Unnecessary policy changes
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning to suspension |
| Per violation | Fines |
| Pattern of violations | License revocation |
| Consumer harm | Restitution required |
Unfair Claims Practices
Pennsylvania has specific claims handling requirements under the Unfair Insurance Practices Act:
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
- Failing to provide reasonable explanation for denial
Claims Timeline Requirements
| Action | Timeframe |
|---|---|
| Acknowledge claim | 10 working days |
| Request additional information | Promptly |
| Accept or deny claim | Reasonable time after investigation |
| Pay undisputed claims | Within 15 days after settlement |
Unfair Discrimination
Pennsylvania prohibits unfair discrimination in P&C insurance:
Prohibited Discrimination
- Race
- Religion
- National origin
- Disability (not related to risk)
- Gender (except where actuarially justified)
Permitted Underwriting Factors
Underwriting based on legitimate risk factors is permitted:
- Driving record
- Claims history
- Property condition
- Loss experience
- Credit information (with restrictions)
Test Your Knowledge
Under Pennsylvania law, what is rebating?
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Test Your Knowledge
What is the difference between twisting and churning?
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