Key Takeaways
- DC prohibits misrepresentation, false advertising, and unfair claims practices
- Rebating is generally prohibited in DC with limited exceptions
- Twisting and churning are prohibited practices subject to license revocation
- DISB enforces unfair trade practice regulations
- Violations can result in fines up to \$10,000 per violation
Unfair Trade Practices
The District of Columbia regulates unfair trade practices in the business of insurance. The Department of Insurance, Securities and Banking (DISB) enforces these regulations.
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 (defamation)
- Misrepresenting the nature of the insurance transaction
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 company is the largest" | If not true, it's false |
| "You must buy today" | False urgency |
False Advertising
DC 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
Rebating
Rebating is offering inducements not specified in the policy to purchase insurance:
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
DC allows:
- Return of divisible surplus (dividends)
- Legitimate policy discounts filed with DISB
- Promotional items of nominal value
- Group premium discounts
Twisting
Twisting is making misrepresentations to induce replacement of existing insurance:
Examples of twisting:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Churning is excessive replacement of policies to generate commissions.
Indicators include:
- Multiple replacements in short periods
- Same client replacing policies repeatedly
- Pattern across producer's book of business
- Surrender charges not disclosed
Unfair Claims Practices
DC has specific unfair claims settlement practice requirements:
Prohibited Practices
| Practice | Description |
|---|---|
| Unreasonable Denial | Denying claims without investigation |
| Delay | Failing to act within required timeframes |
| Low-balling | Offering significantly less than owed |
| Misrepresenting Coverage | Denying based on false policy interpretation |
| Threatening | Intimidating claimants |
| Failure to Explain | Not providing denial reasons |
Required Timeframes
| Action | Timeframe |
|---|---|
| Acknowledge claim | 10 business days |
| Claim decision | 45 days |
| Payment | 30 days after decision |
| Interest | Accrues on late payments |
Unfair Discrimination
DC prohibits unfair discrimination in insurance:
Prohibited Basis for Discrimination
- Race, color, or national origin
- Religion
- Sex (with limited actuarial exceptions)
- Sexual orientation
- Gender identity or expression
- Marital status
- Source of income
Permitted Underwriting Factors
Risk-based underwriting using:
- Age (actuarially justified)
- Health status (for non-ACA plans)
- Occupation
- Geographic location
Penalties for Violations
| Violation Level | Penalty |
|---|---|
| Minor First Offense | Warning, corrective action |
| Per Violation | Up to $10,000 fine |
| Pattern of Conduct | License suspension |
| Willful Violations | License revocation |
| Fraud | Criminal prosecution |
Is rebating generally permitted in the District of Columbia?
What agency enforces unfair trade practice regulations in DC?
Which practice involves inducing a policyholder to replace coverage through misrepresentation?