Key Takeaways
- New Mexico has adopted the Unfair Insurance Practices Act under NMSA 59A-16
- Rebating is prohibited under New Mexico law with limited exceptions
- Twisting and churning are prohibited replacement practices
- The Superintendent of Insurance has enforcement authority
- Insurers must handle claims fairly and promptly
Unfair Trade Practices
New Mexico has adopted comprehensive unfair trade practices regulations under Chapter 59A, Article 16 of the New Mexico Statutes Annotated.
Unfair Insurance Practices Act
New Mexico prohibits various unfair or deceptive practices in the insurance industry.
Misrepresentation
Producers and insurers are prohibited from:
- 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
False Advertising
New Mexico 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
New Mexico allows:
- Dividends specified in policy
- Legitimate marketing items of nominal value
- Group premium discounts
- Premium financing arrangements
Exam Tip: Rebating is generally prohibited in New Mexico. Remember the limited exceptions.
Twisting and Churning
Twisting
Twisting is misrepresenting the terms of an existing policy to induce replacement:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding costs of replacement
- Exaggerating benefits of new policy
Churning
Churning is excessive replacement to generate commissions.
Penalties
| Violation | Potential Penalty |
|---|---|
| First offense | Warning, fine, or suspension |
| Repeat offense | License revocation |
| Consumer harm | Restitution required |
Claims Handling Requirements
New Mexico has guidelines for fair claims handling:
Required Practices
Insurers must:
- Acknowledge claims with reasonable promptness
- Act reasonably promptly on communications
- Adopt reasonable standards for prompt investigation
- Attempt in good faith to settle claims where liability is clear
Prohibited Practices
Insurers cannot:
- Misrepresent policy provisions to claimants
- Fail to acknowledge claims promptly
- Deny claims without reasonable investigation
- Delay payment to force settlement
Unfair Discrimination
New Mexico prohibits unfair discrimination in insurance based on race, religion, national origin, and disability.
Under which statute does New Mexico regulate unfair trade practices?
Which of the following is generally PERMITTED in New Mexico insurance sales?
What is twisting in New Mexico insurance law?
What can an insurer NOT do under New Mexico claims handling rules?