Montana Prohibited Practices and Consumer Protection

Montana insurance law establishes clear prohibitions against practices that harm consumers or undermine fair competition. The Commissioner of Securities and Insurance (CSI) enforces these rules to protect Montana policyholders.

Prohibited Trade Practices

Misrepresentation

Misrepresentation is making false or misleading statements about insurance:

Consequences of Misrepresentation

• License suspension or revocation
• Fines up to $5,000 per violation
• Civil liability to harmed parties
• Criminal prosecution for fraud
• Restitution to affected consumers

False Advertising

Montana prohibits false advertising including:

• Misleading policy names or descriptions
• Testimonials that misrepresent typical results
• Comparisons that unfairly disparage competitors
• Omitting material limitations from advertisements
• Using confusing or deceptive language

Rebating

What Constitutes Rebating

Rebating is offering valuable consideration not specified in the policy as an inducement to purchase:

What Is NOT Rebating

Exam Tip: Rebating includes ANY valuable consideration not in the policy, even if the producer is sharing their own commission. Montana strictly enforces anti-rebating laws.

Twisting and Churning

Twisting

Twisting is inducing a policyholder to replace coverage through misrepresentation:

Example: Telling a client their current homeowners policy "won't pay claims" when it actually provides adequate coverage, to convince them to buy a new policy.

Churning

Churning is excessive replacement of policies to generate commissions:

Replacement Regulations

Montana requires specific procedures for policy replacement:

1. Comparison Statement: Provide written comparison of existing and proposed coverage
2. Notice to Existing Insurer: Notify current company of potential replacement
3. Client Signature: Obtain signed acknowledgment of replacement
4. Documentation: Maintain replacement records

Unfair Discrimination

Prohibited Discrimination

Montana prohibits unfair discrimination in insurance:

Permitted Underwriting Factors

Unfair Claims Practices

Prohibited Claims Practices

Montana Claims Handling Timeline

Consumer Protection

Montana Consumer Rights

Policyholders in Montana have rights including:

Filing Complaints with CSI

Complaint Process

1. Filing: Consumer submits written complaint
2. Acknowledgment: CSI acknowledges within 10 business days
3. Investigation: CSI forwards to insurer, requests response
4. Response: Insurer must respond within 30 days
5. Review: CSI reviews response and consumer's position
6. Resolution: CSI mediates or takes enforcement action

Disciplinary Actions

Grounds for Discipline

Penalty Ranges

Due Process Rights

Producers facing discipline have rights:

• Notice of charges in writing
• Opportunity to respond
• Administrative hearing if requested
• Legal representation
• Appeal to district court

Privacy and Data Protection

Montana Privacy Requirements

Data Breach Notification

If personal information is compromised:

• Notify affected consumers without unreasonable delay
• Provide information about the breach
• Offer mitigation services if appropriate
• Report to CSI if affecting Montana residents

Exam Tip: On ethics and prohibited practices questions, choose the answer that protects consumers, follows Montana law, and maintains professional standards - even if it means losing a sale or earning less commission.