4.1 Unfair Trade Practices

The Oklahoma Unfair Practices Act

Oklahoma adopted the National Association of Insurance Commissioners (NAIC) model as the Unfair Practices Act, codified at Title 36 of the Oklahoma Statutes, Article 12 (36 O.S. § 1201 et seq.). Section 1203 makes it unlawful for any person to engage in an act that is defined in or determined to be an unfair method of competition or an unfair or deceptive act. Section 1204 lists the named offenses. On your exam, the 38-question Oklahoma state portion is where this law is tested, and this statute is the densest source of those items, so learn the named acts cold.

Misrepresentation and False Advertising (§ 1204(1))

Misrepresentation is any false or misleading statement about a policy's terms, benefits, dividends, or share of surplus, or about an insurer's financial condition. A producer who tells a client a universal-life policy is "fully paid up in seven years" when the illustration only shows non-guaranteed values has misrepresented the contract. False advertising covers any untrue, deceptive, or misleading announcement in any medium. Ads must identify the actual insurer, must not imply government endorsement, and must not use a non-genuine testimonial.

Defamation, Boycott, and Coercion (§ 1204(2)-(4))

• Defamation – a false, maliciously critical statement about another insurer's financial condition (telling a prospect a competitor is "about to go broke").
• Boycott, coercion, intimidation – forcing a monopoly or restraint of trade, e.g., a lender requiring the borrower to buy insurance from one named agency.
• False financial statements / false entries – filing or publishing untrue reports about an insurer's assets or condition.

Rebating (§ 1204(8))

Rebating is offering or giving any valuable consideration not specified in the policy as an inducement to buy, keep, or renew insurance. Oklahoma bans both sides of the transaction: a producer may not pay it and a client may not knowingly accept it. Prohibited items include returning part of the premium, sharing commission with the insured, paying a special dividend, or giving stock, securities, or paid employment as an inducement.

Bulletin No. 2025-01 – Returned Commissions

The Oklahoma Insurance Department issued Bulletin No. 2025-01 (Anti-Rebating Statutes) to close a loophole. It states that returning any portion of a commission to secure or retain business – regardless of how the money ultimately benefits the insured, and whether the deal is struck between producer and insured or producer and insurer as a reduced premium – is rebating and violates the Act. The bulletin does not override the statutory exceptions in 36 O.S. § 1204(8)(b).

What IS Permitted (the § 1204(8)(b) carve-outs)

Enforcement and Penalties (§ 1207 and § 1211)

Under 36 O.S. § 1207, after a hearing (or waiver of the hearing) the Insurance Commissioner reduces the findings to writing and issues a cease-and-desist order against the named unfair practice. Section 1207 itself carries no monetary fine – it is the order-issuing mechanism. The civil penalty lives in 36 O.S. § 1211: a person who violates a final cease-and-desist order while it is in effect forfeits and pays the State a civil penalty of not less than $100 nor more than $1,000 for each violation.

Separately, the producer's license may be suspended or revoked and § 1212 preserves any other fines or forfeitures available under law.

Exam trap: Oklahoma's UTPA penalty is the $100–$1,000-per-violation figure tied to disobeying a final C&D order under § 1211 – do not pick the generic $1,000/$10,000-knowing/$50,000-cap figures from the NAIC model or other states; Oklahoma did not enact that tiered schedule.

Exam tip: If an answer choice describes the agent returning commission or premium "to help the client afford the policy," it is rebating – even when the client benefits. Bulletin 2025-01 is the trap.

Twisting, Churning, and Unfair Claims

Twisting vs. Churning

Twisting is using a misrepresentation or incomplete comparison to convince a policyholder to lapse or surrender one policy and buy another, usually from a different insurer. Churning (also called internal replacement abuse) is doing the same thing within the same insurer's book – stripping cash value from an existing policy to fund a new one and start a fresh surrender-charge clock.

Both are unfair practices, and both trigger Oklahoma's replacement rules (Reg. LH; signed comparison and 30-day free-look on the new contract).

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

Oklahoma's stand-alone claims statute lists conduct that, when committed with such frequency as to indicate a general business practice, is unfair. Insurers must:

• Acknowledge and act promptly on claim communications
• Adopt reasonable standards for prompt investigation
• Attempt in good faith to settle where liability is reasonably clear

They may not:

• Misrepresent policy provisions to a claimant
• Deny a claim without a reasonable investigation
• Offer substantially less than the amount ultimately recovered
• Compel litigation by lowballing the settlement

Unfair Discrimination (§ 1204(7))

No insurer may unfairly discriminate between individuals of the same class and equal life expectancy in life-insurance rates, dividends, or benefits, or between insureds with substantially like risk for health insurance. Discrimination on race, color, religion, national origin, or solely on blindness/partial blindness is prohibited. Lawful, risk-based factors – age, tobacco use, occupation, health history, hazardous avocations – remain permitted because they reflect actual mortality or morbidity.