Key Takeaways
- The Florida Unfair Insurance Trade Practices Act (Section 626.951-626.9641) prohibits misrepresentation and unfair practices
- Rebating is prohibited in Florida with limited exceptions for premium financing and nominal gifts
- Twisting and churning are prohibited practices subject to license revocation and fines up to $5,000
- Florida requires prompt claim handling with specific timeframes for acknowledgment and payment
- Unfair discrimination based on race, religion, national origin, or handicap is prohibited
Unfair Trade Practices
The Florida Unfair Insurance Trade Practices Act (Florida Statutes Sections 626.951-626.9641) prohibits various unfair or deceptive practices in the 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 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 change |
| "This company is the most stable" | If not verifiable |
| "You must buy today" | False urgency |
False Advertising
Florida 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
Digital and Social Media
- Same standards apply to social media
- Must be clear it's an advertisement
- Cannot make unsubstantiated claims
- Producer must be identified
- Records must be kept
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 non-licensees
- Sharing commission with non-licensed persons
Permitted Exceptions
Florida allows:
- Premium financing arrangements
- Dividends specified in policy
- Legitimate marketing items of nominal value
- Group premium discounts authorized by insurer
- Meals and entertainment of reasonable value
Exam Tip: Rebating is prohibited in Florida. Remember the limited exceptions for nominal value items and premium financing.
Twisting and Churning
Twisting
Making misrepresentations to induce replacement of existing insurance:
- Falsely claiming existing policy is deficient
- Misrepresenting cash surrender 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
- Using policy values to pay new premiums repeatedly
- Creating new surrender charge periods
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning, fine, or suspension |
| Repeat offense | License revocation |
| Per violation | Up to $5,000 fine |
| Consumer harm | Restitution required |
Unfair Claims Practices
Florida requires insurers to handle claims fairly and promptly:
Prohibited 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
- Requiring excessive documentation
Claim Handling Timeframes
| Action | Florida Requirement |
|---|---|
| Acknowledge claim | 14 days |
| Begin investigation | Immediately upon notice |
| Pay or deny claim | 90 days after proof of loss |
| Pay undisputed amounts | 20 days after agreement |
Bad Faith
If an insurer acts in bad faith, policyholders may recover:
- Policy benefits owed
- Consequential damages
- Punitive damages in some cases
- Attorney's fees under certain statutes
Unfair Discrimination
Florida prohibits unfair discrimination in insurance:
Protected Categories
| Category | Protection |
|---|---|
| Race | Cannot use in underwriting or rating |
| Color | Cannot use in underwriting or rating |
| Religion | Cannot use in underwriting or rating |
| National Origin | Cannot use in underwriting or rating |
| Marital Status | Limited use restrictions |
| Handicap | Cannot discriminate unfairly |
Permitted Rating Factors
Insurers can consider:
- Age
- Health status (where permitted)
- Smoking/tobacco use
- Occupation
- Other actuarially justified factors
What is the maximum fine per violation for unfair trade practices in Florida?
Within how many days must a Florida insurer acknowledge receipt of a claim?
Which of the following is generally PERMITTED in Florida insurance sales?