Unfair Trade Practices

South Dakota prohibits various unfair or deceptive practices in the insurance industry under Title 58.

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

Section 58-33-6

Under this section, misrepresentation includes making, issuing, circulating, or causing to be made any statement misrepresenting:

• Terms of any policy
• Benefits or advantages promised
• Dividends or share of surplus
• Financial condition of any insurer

Rebating

Rebating is prohibited under South Dakota law:

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

South Dakota allows:

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

Twisting and Churning

Twisting

Twisting is making misrepresentations to induce replacement:

• Falsely claiming existing policy is worthless
• Misrepresenting surrender values
• Making incomplete or false comparisons
• Omitting material information

Churning

Churning is excessive replacement to generate commissions:

• Multiple replacements for same client
• Pattern of replacements in book of business
• Ignoring client's best interests

Unfair Discrimination

Under Section 58-33-13, unfair discrimination is prohibited:

Prohibited Discrimination

No person may make or permit any unfair discrimination:

• Between individuals of the same class
• Of essentially the same hazard
• In the amount of premium, policy fees, or rates charged

What IS Permitted

Risk-based underwriting using:

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

Unfair Claims Practices

South Dakota requires insurers to handle claims fairly:

Prohibited Practices

• Misrepresenting policy provisions to claimants
• Failing to acknowledge claims promptly
• Denying claims without reasonable investigation
• Delaying payment to force settlement

Penalties for Violations