Unfair claim settlement, misrepresentation and rebating rules for P&C agents

Unfair Methods of Competition and Deceptive Trade Practices

The department may examine and investigate the affairs of any person engaged in the business of insurance in Texas to determine whether that person has engaged or is engaged in an unfair method of competition or an unfair or deceptive act or practice (Tex. Ins. Code §541.101). As a licensed property and casualty agent, you must understand that Texas law strictly prohibits misleading prospective or current policyholders. Prohibited acts include misrepresenting a policy's terms, promised benefits or advantages, or dividends or share of surplus to be received (Tex. Ins. Code §541.051(1)). Under administrative rules, misrepresentation includes an untrue statement of a material fact or an omission of a material fact necessary to make other statements not misleading under the circumstances (28 TAC §21.4).

You may never make a misrepresentation to induce a policyholder to allow an existing policy to lapse, forfeit, or surrender (Tex. Ins. Code §541.051(5)). For example, if Carlos tells an insured homeowner that an existing policy provides zero roof coverage simply to persuade the homeowner to cancel it and buy a new policy through him, Carlos violates this law. Additionally, publishing or disseminating an advertisement containing an untrue, deceptive, or misleading assertion regarding the business of insurance is prohibited (Tex. Ins. Code §541.052(a)). Advertisements may not directly or indirectly make an unfair or incomplete comparison of policies, benefits, dividends, or rates (28 TAC §21.111(a)). Furthermore, no property and casualty advertisement may use the word dividends in a manner that states or implies future dividends are guaranteed or certain to occur (28 TAC §21.115(a)).

Texas law also protects insurance institutions and the public from bad-faith market tactics. Making or circulating any statement that is false, maliciously critical of, or derogatory to an insurer's financial condition and is calculated to injure a person engaged in the business of insurance is illegal (Tex. Ins. Code §541.053(a)). Knowingly filing or publishing a false statement of an insurer's financial condition with intent to deceive is likewise prohibited (Tex. Ins. Code §541.055(a)). Texas prohibits committing, through concerted action, or agreeing to commit a boycott, coercion, or intimidation that results in or tends to result in an unreasonable restraint or monopoly in the business of insurance (Tex. Ins. Code §541.054). Finally, subject to the first-continuous-actual-use exception, you may not use a business name, word, symbol, device, or slogan that is deceptively similar to one used by an authorized insurance-related entity (Tex. Ins. Code §541.059(a), (b)).