Unfair Trade Practices

Oklahoma has adopted comprehensive unfair trade practices regulations under Title 36 of the Oklahoma Statutes.

Unfair Insurance Trade Practices Act

Under 36 O.S. § 1203, no person shall engage in any trade practice which is defined as, or determined to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

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

Oklahoma 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 (36 O.S. § 1204)

Rebating is offering inducements not specified in the policy to purchase insurance:

What Is Prohibited

Under Oklahoma law, the following are prohibited:

• Making any contract of insurance other than as plainly expressed in the contract
• Paying or allowing any rebate of premiums payable on the contract
• Offering special favors or advantages in dividends or other benefits
• Returning any portion of commissions to insureds

Oklahoma Bulletin 2025-01

The Oklahoma Insurance Department issued Bulletin 2025-01 clarifying:

• Returning commissions to secure or retain business is rebating
• Whether negotiated with insured or insurer, returned commissions are rebates
• This applies regardless of how the returned commission is used
• Violations subject to unfair trade practice laws

Limited Exceptions

Oklahoma allows:

• Paying bonuses from nonparticipating insurance surplus (if fair and equitable)
• Making allowances for direct office payments (industrial debit plans)
• Readjusting premium rates based on loss or expense experience
• Dividends specified in policy
• Legitimate marketing items of nominal value

Penalties

Exam Tip: Rebating is generally prohibited in Oklahoma. The 2025 bulletin specifically clarifies that returning commissions is a violation.

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:

• Multiple replacements for same client
• Pattern of replacements in producer's book
• Ignoring client's best interests
• Creating new surrender charge periods

Unfair Claims Settlement Practices (36 O.S. § 1250.3)

Oklahoma 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
• Fail to communicate claim decisions
• Deny claims without reasonable investigation
• Offer substantially less than reasonable value
• Delay payment to force settlement

Unfair Discrimination (36 O.S. § 1204)

Oklahoma prohibits unfair discrimination in insurance:

Prohibited Practices

As to kinds of insurance other than life and accident and health, no person shall make or permit any unfair discrimination in favor of particular persons, or between insureds with substantially like insuring, risk, and exposure factors.

What IS Permitted

Risk-based underwriting using:

• Age
• Health history
• Claims history
• Occupation
• Lifestyle factors (smoking, hazardous activities)