4.1 Unfair Trade Practices

The Missouri Unfair Trade Practices Act

Missouri's Unfair Trade Practices Act is codified at RSMo Sections 375.930 through 375.948. It declares certain acts to be unfair methods of competition and unfair or deceptive acts in the business of insurance. The Director of the Department of Commerce & Insurance (DCI) enforces it. You will not be asked to recite the statute by number on the national section, but the concepts (rebating, twisting, misrepresentation) are heavily tested on the Missouri state-law section.

The Missouri Life & Health producer exam is administered by Pearson VUE with the standard national/state split, and you must score 70 on each section separately (the scores are not averaged). Ethics and prohibited practices appear in the Missouri state section, so this chapter is high-yield.

Misrepresentation (RSMo 375.936(6))

It is unlawful to issue or circulate any statement that misrepresents policy terms, benefits, dividends, or the financial condition of an insurer. Prohibited acts include:

• Misstating the terms, benefits, or dividends of a policy
• Using a misleading policy illustration or name
• Misrepresenting an insurer's financial condition or legal reserve system
• Making false statements about a competitor (defamation)
• Misrepresenting the true nature of the transaction (e.g., calling a life policy a "savings plan" or "retirement account")

Worked example

A producer tells a client, "This whole life policy is just like a CD but tax-free and fully guaranteed." This is misrepresentation: cash value growth is not equivalent to a bank CD, and calling it "fully guaranteed" obscures surrender charges and loan interest. This single statement can support a license action under RSMo 375.141.

False Advertising and Defamation

RSMo 375.936(2) and (3) prohibit untrue, deceptive, or misleading advertisements and defamation of any insurer. Advertising must be truthful, must not imply government endorsement, and must not use fabricated testimonials. A common trap: implying a Medicare Advantage plan is "the official Medicare plan" — that falsely implies government sponsorship and is prohibited.

Rebating (RSMo 375.936(8) and (9))

Rebating is offering any premium discount, valuable consideration, or inducement not specified in the policy to persuade someone to buy insurance. In Missouri rebating is illegal whether offered or accepted — the client who takes a rebate also violates the law.

What is prohibited

• Returning part of the producer's commission to the buyer
• Paying a gift or prize conditioned on the purchase
• Sharing commission with an unlicensed person
• Paying a referral fee for a specific sale to a non-licensee

What is allowed

Missouri permits articles of merchandise of nominal value (pens, calendars, refrigerator magnets) bearing the agency name, as long as they are not conditioned on buying a policy. Also allowed: dividends specified in the policy, premium-financing arrangements, and group experience-rated discounts.

Exam trap: The dividing line is not a dollar amount — it is whether the item is conditioned on the sale. A $10 gift card given "if you buy today" is illegal rebating; a $10 logo umbrella handed to everyone who walks in is allowed.

Twisting and Churning

Both are abusive replacement practices, distinguished by who the new insurer is.

Twisting (RSMo 375.936(6))

Using misrepresentation or incomplete comparison to induce a policyholder to lapse, surrender, or replace existing coverage — typically replacing a policy from another insurer. Example: telling a client her existing policy "has no value" to push a new contract.

Churning

The same abusive replacement, but using the policyholder's own existing values (cash value or dividends) to fund a new policy with the same insurer, resetting surrender charges and generating fresh commission.

Penalties and enforcement

The DCI may issue a cease-and-desist order, impose a penalty up to $50,000 per knowing violation (lesser amounts for non-knowing acts), order restitution, and suspend or revoke the license under RSMo 375.141. Repeated or fraudulent conduct can lead to criminal referral.

Unfair Claims Settlement Practices

Missouri's unfair claims rules sit in RSMo 375.1000-375.1018 and DCI regulations at 20 CSR 100-1. They prohibit insurers from handling claims in bad faith. A practice violates the act when it is committed with such frequency as to indicate a general business practice.

Prohibited claims acts

• Misrepresenting pertinent facts or policy provisions to a claimant
• Failing to acknowledge communications about a claim promptly (DCI rule: generally within 10 working days)
• Failing to adopt reasonable standards for prompt investigation
• Denying a claim without a reasonable investigation based on available information
• Offering substantially less than the amount ultimately recovered
• Compelling insureds to litigate by routinely lowballing
• Failing to affirm or deny coverage within a reasonable time after a proof of loss

Unfair Discrimination (RSMo 375.936(4) and (11))

Missouri prohibits unfair discrimination between individuals of the same class and equal expectation of life in rates, dividends, or benefits. It is the same class language that matters: charging two 40-year-old non-smokers in the same health class different rates would be unfair; charging a smoker more is lawful underwriting.

Prohibited basis vs. permitted basis

Missouri-specific: Missouri bars using genetic test results to deny or rate life and health coverage unfairly, and bars discrimination against domestic-violence victims solely on that status. These are favorite distractor topics on the state exam.

Enforcement summary

Violations are pursued by the DCI Director through investigation, hearing, cease-and-desist orders, fines, restitution, and license action — producers should treat frequency and intent as the factors that escalate a single mistake into a sanctionable "general business practice."