Responsible Sales and Client Explanations

Producer Representation and Ethical Standards

When acting within the authority an insurer grants, a producer represents the insurer in sales and policy delivery. Express authority is authority the insurer explicitly gives a producer, often in an agency agreement. Implied authority includes the customary acts a producer must perform to carry out the express authority granted by the insurer. Apparent authority arises when an insurer leads a reasonable consumer to believe a producer possesses authority that was not actually granted. A producer who exceeds actual or implied authority granted by the insurer may be held personally liable for resulting losses.

A producer must handle money and other property entrusted to them responsibly and deal honestly and fairly with both the insurer and the client; the producer is not automatically the client's fiduciary. An ethical sales presentation begins by learning about the client's coverage needs, existing insurance, and budget. You should recommend coverage that fits the client's identified needs, budget, and coverage objectives.

Producers must never misrepresent policy terms, benefits, dividends, or cost structures during a sales presentation. Several deceptive practices are strictly prohibited. Twisting is using a misleading comparison or misrepresentation to induce someone to replace or give up an existing insurance policy. Churning is an improper replacement of a policy with another policy from the same insurer, often to generate a commission without a meaningful benefit to the client. Insurance defamation involves making or circulating false or maliciously critical statements about an insurer's financial condition or insurance business. Additionally, state law may require notices or procedures when existing health coverage is replaced, and requirements vary by state and type of policy.