Key Takeaways
- Virginia law prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is prohibited in Virginia with limited exceptions for legitimate discounts
- Twisting and churning are prohibited practices subject to license revocation and fines
- Virginia follows the NAIC Unfair Trade Practices Act model with state modifications
- Unfair discrimination in underwriting is prohibited except for actuarially justified factors
Last updated: January 2026
Unfair Trade Practices
Title 38.2 of the Virginia Code 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 |
| "VPIA is just as good as regular insurance" | Coverage is more limited |
False Advertising
Virginia 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 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
Permitted
- Premium financing arrangements
- Legitimate filed discounts
- Marketing items of nominal value
- Dividends specified in policy
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 | Monetary fine |
| Pattern of violations | License revocation |
| Consumer harm | Restitution required |
Unfair Claims Practices
Virginia has specific claims handling requirements:
Claims Timeline Requirements
| Action | Timeframe |
|---|---|
| Acknowledge claim | 10 working days |
| Begin investigation | Promptly |
| Accept or deny claim | 45 days after proof of loss |
| Pay claims | Promptly 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
- Failing to affirm or deny coverage within reasonable time
Unfair Discrimination
Virginia prohibits unfair discrimination in P&C insurance:
Prohibited Basis
- Race
- Religion
- National origin
- Sex (with exceptions)
- Marital status (with exceptions)
- Age (with exceptions)
Permitted Underwriting Factors
- Driving record
- Claims history
- Property characteristics
- Location (when actuarially justified)
- Credit-based insurance scores (within limits)
Test Your Knowledge
Within how many working days must a Virginia insurer acknowledge receipt of a P&C claim?
A
B
C
D
Test Your Knowledge
Which of the following is considered an unfair trade practice in Virginia?
A
B
C
D