Key Takeaways
- Misrepresentation of policy terms, benefits, or insurer financial condition is strictly prohibited
- Rebating - offering inducements not in the policy to purchase insurance - can result in license revocation
- Twisting - misrepresenting facts to induce policy replacement - is a serious violation
- Unfair discrimination based on non-risk factors like race or religion is prohibited
- The Nebraska Consumer Protection hotline is (877) 564-7323 for complaints
Last updated: January 2026
Prohibited Practices and Consumer Protection
Unfair Trade Practices
Nebraska law prohibits various unfair trade practices that harm consumers and undermine the integrity of the insurance industry.
Categories of Prohibited Practices
| Category | Description |
|---|---|
| Misrepresentation | False or misleading statements |
| Rebating | Illegal inducements to purchase |
| Twisting | Misrepresentation to replace policies |
| Churning | Excessive replacement for commissions |
| Unfair Discrimination | Non-risk-based decisions |
| Defamation | False statements about competitors |
| Coercion | Forcing insurance purchases |
| Fraud | Intentional deception for gain |
Misrepresentation
Definition
Misrepresentation is making false or misleading statements about:
- Policy benefits, advantages, or conditions
- Dividends or share of surplus to be received
- Financial condition of any insurer
- Policy terms, premiums, or values
- Name or title of any policy
Examples of Misrepresentation
| Misrepresentation | Why It's Wrong |
|---|---|
| "This policy covers everything" | No policy covers all losses |
| "You'll definitely get this dividend" | Dividends aren't guaranteed |
| "Company XYZ is about to fail" | False statement about competitor |
| "Your premium will never increase" | Premiums can change at renewal |
| "This claim will definitely be paid" | Cannot guarantee claim outcomes |
Consequences
| Consequence | Details |
|---|---|
| License revocation | Loss of ability to sell insurance |
| Fines | Up to $10,000 per violation |
| Criminal charges | For intentional fraud |
| Civil liability | Lawsuits from damaged parties |
| Restitution | Repayment to harmed consumers |
Exam Tip: Any false statement about coverage, benefits, or an insurer's financial condition constitutes misrepresentation - even if unintentional. Always verify facts before making statements.
Rebating
Definition
Rebating is offering any valuable consideration not specified in the policy as an inducement to purchase insurance.
Prohibited Inducements
| Prohibited | Why |
|---|---|
| Cash payments | Reduces premium unfairly |
| Gift cards | Valuable consideration |
| Expensive gifts | Inducement to purchase |
| Stock or securities | Valuable consideration |
| Employment offers | Tied to insurance purchase |
| Commission sharing | With non-licensed persons |
| Paying client's bills | Indirect rebate |
Permitted Activities
| Permitted | Reason |
|---|---|
| Promotional items | Minimal value ($25 or less) |
| Company-approved dividends | In policy contract |
| Experience rating credits | Filed with Department |
| Group discounts | Filed and approved |
| Loss control services | Reduces insurer risk |
| Educational materials | No purchase required |
Rebating Penalties
| Penalty | Details |
|---|---|
| License revocation | Mandatory for rebating |
| Fines | Up to $10,000 per violation |
| Criminal prosecution | Possible in serious cases |
| Insurer penalties | For allowing/encouraging |
Twisting
Definition
Twisting is misrepresenting policy terms or making incomplete comparisons to induce a policyholder to lapse, surrender, or replace existing insurance.
Examples of Twisting
| Twisting Action | Why It's Wrong |
|---|---|
| "Your current policy is worthless" | Misrepresentation of value |
| "You'll save money" (hiding costs) | Incomplete comparison |
| Hiding surrender charges | Material omission |
| Exaggerating new policy benefits | False comparison |
| Ignoring loss of existing benefits | Incomplete disclosure |
Replacement Regulations
When replacing existing insurance, Nebraska requires:
- Full disclosure of all costs involved
- Comparison of old and new policy features
- Written acknowledgment of replacement
- Notification to existing insurer in some cases
Twisting vs. Legitimate Replacement
| Twisting | Legitimate Replacement |
|---|---|
| Misrepresents existing coverage | Accurate comparison |
| Hides replacement costs | Full cost disclosure |
| Serves producer's interest | Serves client's interest |
| Uses pressure or urgency | Allows time to decide |
| Incomplete comparison | Complete comparison |
Churning
Definition
Churning is the excessive replacement of insurance policies to generate commissions without benefit to the client.
Indicators of Churning
| Indicator | Description |
|---|---|
| Pattern of replacements | Same client, multiple policies |
| No demonstrable benefit | Client not better served |
| Commission motivation | Producer benefits, client doesn't |
| Short policy duration | Policies replaced before value realized |
| Complaints | Multiple clients report similar pattern |
Churning Penalties
| Penalty | Details |
|---|---|
| License revocation | For pattern of churning |
| Fines | Per occurrence |
| Restitution | To affected clients |
| Insurer termination | Contract cancelled |
Unfair Discrimination
Prohibited Discrimination
Insurance decisions cannot be based on:
| Prohibited Factor | Notes |
|---|---|
| Race | Never permitted |
| Religion | Never permitted |
| National origin | Never permitted |
| Ethnicity | Never permitted |
| Gender | Limited exceptions for actuarial data |
| Sexual orientation | Protected in Nebraska |
| Disability | With limited exceptions |
Permitted Underwriting Factors
| Permitted Factor | Basis |
|---|---|
| Driving record | Risk-based |
| Claims history | Risk-based |
| Property condition | Risk-based |
| Location/territory | Risk-based |
| Credit score | Regulated, but permitted |
| Age | Actuarially justified |
| Coverage selected | Customer choice |
Consumer Protection
Nebraska Consumer Rights
Nebraska consumers have the right to:
| Right | Description |
|---|---|
| Clear information | Understandable policy terms |
| Fair treatment | Non-discriminatory practices |
| Timely claims | Prompt handling and payment |
| Privacy | Protection of personal information |
| Complaint process | Access to Department assistance |
| Written explanations | Reasons for adverse decisions |
Filing Complaints
Nebraska Department of Insurance Consumer Hotline:
- Toll-Free: (877) 564-7323
- Local: (402) 471-2201
- Website: doi.nebraska.gov
- Email: doi.consumer@nebraska.gov
Complaint Process
- Initial Contact - Consumer contacts Department
- Documentation - Complaint details recorded
- Investigation - Department contacts insurer
- Response - Insurer provides explanation
- Resolution - Mediation or formal action
- Appeal - Administrative hearing if needed
Consumer Protection Laws
| Law | Protection |
|---|---|
| Unfair Claims Practices Act | Timely, fair claims handling |
| Privacy regulations | Personal information protection |
| Anti-coercion provisions | Freedom from forced purchases |
| Cancellation notice requirements | Adequate notice of termination |
| Free look provisions | Time to review and cancel |
Fraud Prevention
Types of Insurance Fraud
| Fraud Type | Description |
|---|---|
| Application fraud | Misrepresenting information on application |
| Claims fraud | False or inflated claims |
| Premium fraud | Misrepresenting premium factors |
| Agent fraud | Stealing premiums, forging documents |
| Staging accidents | Creating fake accidents |
Producer Obligations
Producers must:
- Not participate in fraudulent activities
- Report suspected fraud to insurers
- Verify application information when possible
- Document client statements
- Cooperate with fraud investigations
Fraud Penalties
| Violation | Penalty |
|---|---|
| License revocation | Automatic for fraud conviction |
| Criminal prosecution | Felony charges possible |
| Prison | Depending on severity |
| Fines | Substantial monetary penalties |
| Restitution | Repay defrauded amounts |
| Civil liability | Lawsuits from victims |
Exam Tip: Insurance fraud is a serious crime in Nebraska. Producers who participate in or fail to report suspected fraud face license revocation and criminal prosecution.
Test Your Knowledge
What is rebating in Nebraska insurance law?
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Test Your Knowledge
What is the difference between twisting and legitimate policy replacement?
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Test Your Knowledge
What is the Nebraska Department of Insurance Consumer Hotline number?
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