Ethical Marketing and Fair Treatment of Policyholders
Wisconsin’s insurance code states its purposes at the outset, and one of them is “to ensure that policyholders, claimants and insurers are treated fairly and equitably” (s. 601.01 (2), Wis. Stat.). The unfair marketing prohibitions you have studied, such as misrepresentation, rebating, unfair discrimination and restraint of competition, are the minimum. Ethical marketing asks a further question: when the sale is over, does the client understand what was bought, and were they treated the way any other client would be? This page covers the Wisconsin rules that put that question into practice.
The Named Prohibitions Are a Floor
Two features of Wisconsin law mean you cannot stay out of trouble just by avoiding the practices listed in s. 628.34.
First, the list is open-ended. After its specific prohibitions, the statute bars “any other unfair method of competition or any other unfair or deceptive act or practice in the business of insurance” as defined by rule (s. 628.34 (11)), and the Commissioner may add practices found to be “misleading, deceptive, unfairly discriminatory,” an unfair inducement or an unreasonable restraint of competition (s. 628.34 (12)).
Second, your license depends on trustworthiness, not just on avoiding named offenses. The Commissioner’s rule treats as evidence of untrustworthiness “intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance” and “using fraudulent, coercive, or dishonest practices” (s. Ins 6.59 (5) (d) 5., 8., Wis. Adm. Code). High-pressure tactics, such as telling a hesitant buyer the offer expires tonight when it does not, or refusing to leave until an application is signed, can be coercive practices even though no statute lists them by name.
| The law prohibits | Ethical marketing also means |
|---|---|
| False or misleading statements, including those misleading because incomplete | Explaining exclusions and limits before the client asks |
| Unfair inducements | Giving every client the same terms the policy states |
| Unfair discrimination | Following the insurer’s actual underwriting standards, not your assumptions |
| Restricting a buyer’s choice of insurer | Telling a client when another product would serve them better |
Selling the Coverage, Not Something Else
No Selling on the Security Fund
Wisconsin’s Insurance Security Fund protects policyholders when an insurer is liquidated. You may not use that protection “in any manner” as a reason to buy from you or your insurer (s. 628.34 (10)). Telling a client “even if this company fails, the state backs your policy” invites the client to stop asking about the insurer’s financial strength. Sell the insurer and the policy on their own merits.
Certificates of Insurance
A certificate of insurance is often what a landlord, general contractor or event venue asks your commercial client for. For property and casualty coverage, Wisconsin law makes clear that the certificate reports coverage and never creates it (s. 628.34 (14)). No certificate may:
- contain false or misleading information about the policy;
- purport to alter, amend or extend the policy’s coverage;
- change the policy’s notice requirements; or
- warrant that the policy meets the insurance requirements of a specific contract.
No one may alter a certificate after it is issued. The rule does not apply to the policy itself, an endorsement or a binder, the documents that actually provide or change coverage. When a general contractor demands a certificate showing coverage your client’s policy does not have, the ethical answer is to get the policy endorsed, if the insurer will, or to tell the client honestly that it is not covered. Issuing a misleading certificate also violates the misrepresentation statute (s. 628.34 (1) (a)).
Every Promise in the Policy
Unfair inducement covers more than cash rebates. No intermediary may induce someone to buy, or to drop a policy, “by offering benefits not specified in the policy,” and no insurer may make “any agreement of insurance that is not clearly expressed in the policy to be issued” (s. 628.34 (2) (a)). A side promise, like “I’ll make sure they pay that claim” or “I’ll cover your deductible if anything happens,” is a benefit the policy does not contain, and it treats this client differently from every other policyholder.
The statute does allow lower premiums that reflect real expense savings, including reduced commissions, from mass marketing. The difference is that a mass-marketing discount is built into the program and offered to everyone in it, while a rebate is a private deal for one buyer.
Treating Applicants Fairly
Fair treatment starts at the application. An insurer may not refuse, limit or price coverage differently because of a physical or mental disability unless the decision rests on sound actuarial principles supported by reliable data, or on actual or reasonably anticipated experience (s. 628.34 (3) (b)). In life and disability insurance, the Commissioner’s rule adds detail (s. Ins 6.67):
- Treating an applicant differently solely because of a physical or mental impairment, or because of blindness or partial blindness, is unfair discrimination, subject to the limited exceptions the rule describes.
- The insurer bears the burden of proving that its practice is actuarially sound or based on experience.
- An insurer may not use sexual orientation in underwriting, may not ask about it on a life or disability application, and may not investigate it “directly or indirectly.”
As the insurer’s agent, you are part of how it gathers information. Ask the questions on the application, record the answers accurately, and do not add questions of your own about matters the insurer is forbidden to consider.
Older and Vulnerable Clients
The penalty for an insurance violation rises to as much as $5,000 per violation when it specifically involves a consumer who is an adult at risk or an individual at least 60 years old, or when it involves fraud or misrepresentation (s. 601.64 (3) (c) 2.). In life and health insurance and annuities, Wisconsin also restricts senior-specific designations that overstate an agent’s training (s. Ins 6.90). In practice, fair treatment of an older client means slowing down: explain the product in plain terms, leave written material to review, welcome a family member or advisor the client wants present, and never treat a confused “yes” as informed consent.
Respecting the Client’s Right to Complain
Every insurer must notify its policyholders and insureds of their right to file a complaint with the Office of the Commissioner of Insurance (OCI) (s. 631.28). Under the Commissioner’s rule, a separate notice of that right is generally provided when the policy or certificate is issued (s. Ins 6.85 (5) (b)).
A complaint is part of how the system treats policyholders fairly, not a threat to your business. For annuities, Wisconsin makes this explicit: an intermediary “may not dissuade, or attempt to dissuade,” a consumer from filing a complaint or from cooperating with the investigation of one (s. 628.347 (3m)). The same principle is sound in every line. If a client is unhappy, help them reach the insurer’s complaint process or OCI, and do not discourage them.
Complaints also belong in your files. Policyholder records include “claims, and complaints associated with a policy generated by or through the intermediary” (s. Ins 6.61 (3) (h)), and you must keep them at least 3 years after the policy terminates or lapses (s. Ins 6.61 (14)).
Lesson summary
- Fair and equitable treatment of policyholders and claimants is a stated purpose of Wisconsin’s insurance code (s. 601.01 (2)).
- The prohibitions in s. 628.34 are a floor: other unfair or deceptive practices can be defined by rule, and coercive or dishonest conduct is evidence of untrustworthiness (s. Ins 6.59 (5) (d)).
- Never use the Insurance Security Fund as a reason to buy (s. 628.34 (10)).
- A property and casualty certificate of insurance may not alter, extend or misstate coverage, change notice terms, or warrant that a contract’s requirements are met (s. 628.34 (14)).
- Offer no benefit the policy does not state; mass-marketing expense savings are the lawful exception (s. 628.34 (2) (a)).
- Life and disability insurers may not treat applicants differently solely because of an impairment without actuarial or experience support, or solely because of blindness, and may not consider sexual orientation (s. Ins 6.67).
- Violations involving consumers at least 60 or adults at risk carry forfeitures up to $5,000 each (s. 601.64 (3) (c) 2.).
- Clients have a right to complain to OCI (s. 631.28); discouraging an annuity complaint is prohibited (s. 628.347 (3m)), and in every line complaints stay in policyholder records for 3 years after the policy ends (s. Ins 6.61).