4.1 Unfair Trade Practices

The Governing Law

Wisconsin's marketing and trade-practice rules live in Chapter 628 of the Wisconsin Statutes (Wis. Stats.) and in administrative rule Ch. Ins 3. The Office of the Commissioner of Insurance (OCI) enforces them. Unlike many states that adopt the NAIC Unfair Trade Practices Model word-for-word, Wisconsin folds these prohibitions into its general producer-conduct statute, so exam questions often cite the conduct, not the section number.

Misrepresentation and False Advertising

Under Wis. Stat. 628.34(1), no person may make a statement they know or should know misrepresents the terms, benefits, or advantages of a policy. Prohibited acts include:

• Misstating policy provisions, dividends, or projected (non-guaranteed) values as if guaranteed
• Using a misleading policy illustration that blends guaranteed and projected figures without labeling them
• Misrepresenting an insurer's financial condition or its OCI filing status
• Defamation — false statements that injure a competitor or another insurer

Worked example: A producer tells a client that the dividend scale on a participating whole-life policy "is locked in for life." Because dividends are never guaranteed, this is misrepresentation even if the producer believes it — the "should have known" standard applies.

Rebating — The Most-Tested Trap

Rebating is giving the applicant any portion of the premium, or any valuable consideration not stated in the policy, as an inducement to buy. Wis. Stat. 628.34(1) bars it. Watch the difference:

The classic exam stem describes a producer offering to "pay your first month" or "give you a $50 gift card to sign today" — both are rebates.

False Advertising and Defamation

Wisconsin treats advertising as a regulated act, not free expression. False advertising covers any printed, broadcast, or online material that misstates the cost, terms, or benefits of insurance, or that misrepresents an insurer's standing. A producer who runs a social-media ad claiming "guaranteed 8% returns" on an indexed product is making a prohibited statement because indexed credits are capped and non-guaranteed.

Defamation is the related wrong of publishing a false statement that injures another insurer or producer — for example, falsely posting that a competitor "is about to be shut down by OCI." Both can draw OCI forfeitures and a cease-and-desist order, and both feed into a producer's fitness review at renewal.

Boycott, Coercion, and Intimidation

Wisconsin also prohibits agreements to boycott, coerce, or intimidate that restrain or monopolize the business of insurance. A lender that conditions a mortgage on the borrower buying insurance from one specified agency is engaging in unlawful coercion (illegal tie-in). On the exam, look for fact patterns where a bank, dealer, or employer pressures a consumer toward a particular producer or insurer.

Twisting vs. Churning

These two are routinely confused on the Wisconsin Life & Health exam, so memorize the distinction.

Twisting is using misrepresentation or incomplete comparison to convince a policyholder to lapse, surrender, or replace an existing policy — usually moving the client to a different insurer. Examples: telling a client their in-force policy is "worthless," understating its surrender value, or omitting new contestability and suicide periods that restart on replacement.

Churning is the producer replacing a policyholder's coverage — often using built-up cash value within the same insurer's book of business — primarily to generate fresh first-year commissions, without a genuine benefit to the client.

Both trigger Wisconsin's replacement rule (Ch. Ins 2.07), which requires a signed replacement notice, comparison disclosure, and delivery of a Buyer's Guide.

Unfair Discrimination

Wis. Stat. 628.34(3) prohibits unfair discrimination — charging different premiums, rates, or terms between insureds of the same class and essentially the same hazard. What is permitted is risk classification supported by sound actuarial or loss data: age, sex (where allowed), tobacco use, occupation, health history, and hazardous avocations. What is prohibited is treating two equally situated applicants differently for reasons unrelated to risk, or for protected characteristics.

Scenario: Two 40-year-old non-smokers in identical health apply for the same term policy. Charging one a higher rate because of national origin is unfair discrimination. Charging a skydiver more than a non-skydiver is lawful risk classification.

Unfair Claim Settlement Practices

Wisconsin (Wis. Stat. 628.46 and Ch. Ins 6.11) requires prompt, good-faith claim handling. Prohibited conduct includes:

• Misrepresenting policy provisions to a claimant
• Failing to acknowledge or act promptly on communications
• Denying a claim without a reasonable investigation
• Forcing litigation by offering substantially less than amounts ultimately recovered

Under 628.46, an insurer that fails to pay an undisputed claim owes 12% annual interest once the claim is overdue (generally 30 days after proof of loss).

Penalties

Note: the prior version of this guide cited a flat $10,000 fine; the statutory forfeiture for unfair-practice acts is up to $1,000 each, though separate provisions carry higher caps for specific frauds.