Accident and Sickness Advertising in Michigan
Advertising is where most clients first meet an insurance product, and it is where a policy’s limits are easiest to hide. Michigan’s accident and sickness advertising rules, R 500.651 to R 500.668, set out what an ad must say, what it may not say, and who answers for it. The rules still speak of the “commissioner” and the “bureau.” That authority now belongs to the Director and the Department of Insurance and Financial Services (MCL 500.102(a), (d); E.R.O. No. 2000-2, MCL 445.2003).
What Counts as an Advertisement
The rules cover disability insurance, comparable coverage offered by multiple employer welfare arrangements, and credit accident and health insurance (R 500.651(a)).
“Advertisement” reaches well past mail and billboards. It includes circulars, form letters, illustrations, and lead-generating devices (R 500.651(b)(i), (ii)). It also includes prepared sales talks and presentations, whoever wrote them, material included with a policy at delivery, and material used to solicit renewals, reinstatements, and alterations (R 500.651(b)(iii) to (v)). So the script you rehearse for appointments is an advertisement.
Three Kinds of Advertisement
| Type | What it is |
|---|---|
| Institutional | Promotes interest in accident and sickness insurance as a concept, or promotes the insurer (R 500.651(f)) |
| Invitation to inquire | Limited to a brief description of coverage, aimed at creating a desire to ask more (R 500.651(i)) |
| Invitation to contract | Any ad that is neither of the others (R 500.651(h)) |
An invitation to inquire must carry this statement or a substantially similar one: “This policy has exclusions, reduction of benefits or terms under which the policy may be continued in force or discontinued. For costs and complete details of the coverage, call or write your insurance agent or the insurance company.” (R 500.651(i)). The type turns on content. A postcard that goes beyond a brief description is an invitation to contract and owes more disclosure.
Who Is Responsible
Every ad is presumed to come from the insurer whose policy it features, and the insurer must keep a system of control over its ads. All of them are the insurer’s responsibility, regardless of who wrote them (R 500.652(3)). That does not protect you. An insurer, agent, or other person may not solicit a Michigan resident in connection with an ad that is misleading or otherwise violates these rules (R 500.654(4)). All ads used by an insurer’s agents need the insurer’s prior written approval (R 500.664(14)).
The Basic Standard
An ad must avoid deception or the capacity or tendency to mislead. The test is the overall impression it may be reasonably expected to create on “a person of average education or intelligence within the segment of the public to which the advertisement is directed” (R 500.654(1)). An ad aimed at retirees is judged by how retirees would read it.
An ad may not use words whose meaning is clear only through familiarity with insurance terms (R 500.654(2)), and a trade name must be followed by “insurance policy” or similar words (R 500.654(3)). Required disclosures must be conspicuous and either close to the statement they relate to or under a prominent caption (R 500.653). Letting the buyer inspect the policy first, or offering a refund, “does not remedy misleading statements” (R 500.655(1)).
| The rules prohibit | Example | Rule |
|---|---|---|
| Exaggerating beyond the policy’s terms | “All,” “full,” “unlimited,” “up to” | R 500.655(2) |
| Overstating Medicare supplement | “This policy pays all that medicare doesn’t” | R 500.655(3) |
| Dressing a limit as a benefit | A waiting period called a “benefit builder” | R 500.655(4) |
| Promising profit from confinement | “Tax free,” “extra cash,” “extra income” | R 500.655(5) |
| Understating exceptions and reductions | “Only,” “just,” “merely,” “minimum” | R 500.656(3) |
| Fear selling for specified disease | Words calculated to arouse fear or dread | R 500.655a(b) |
A hospital confinement ad may not feature a monthly or weekly amount when the benefit is paid by the day, unless the daily amount is emphasized and comes first, and any limit on days must appear (R 500.655(6)). An ad for a policy covering specified illnesses or accidents only must state the policy’s limited nature in type at least 2 points larger than the body of the ad, with words such as “this is a cancer only policy” (R 500.655(7)).
Required Disclosures in an Invitation to Contract
When an invitation to contract mentions a dollar amount, a benefit period, the cost, a specific benefit, or the loss covered, it must also disclose the exceptions, reductions, and limitations without which it would mislead (R 500.656(1)). It must disclose any waiting, elimination, or probationary period (R 500.656(2)), along with renewability, cancellability, termination, and modification terms (R 500.658).
It must also disclose “in negative terms” how far a loss traceable to an earlier condition is not covered, and “preexisting condition” may not be used without a definition or description (R 500.657(1)). A policy that does not cover such losses may not be advertised with “no medical examination required” or a similar phrase (R 500.657(2)). Most major medical policies can no longer exclude preexisting conditions, so this rule now does most of its work on products outside that ban, such as hospital confinement indemnity and specified disease indemnity coverage (MCL 500.3406ii(1), (2)(b)).
When an ad offers a choice of benefit amounts, it must say that benefits depend on the plan selected and that the premium varies with them. When it describes benefits found in 2 or more policies, other than group master policies, it must say they come only through a combination of those policies (R 500.661).
Statistics, Comparisons, and Status
Claims or membership figures must reflect all material facts, identify the policy they relate to, and name their source (R 500.660(1), (2), (5)). An ad may not call claim settlements “liberal” or “generous” (R 500.660(4)). It may not make unfair comparisons or disparage competitors (R 500.662).
An ad may not suggest that a state or federal agency approved or endorsed the insurer, its forms, or its advertising (R 500.663(2), (3)). The actual insurer’s name must be stated conspicuously, and an invitation to contract must give the policy form number (R 500.664(1)).
Ads may not suggest a connection with a governmental agency (R 500.664(2), (3), (6)) or use a state’s name in a policy name or description (R 500.664(5)). A Medicare supplement ad must carry a disclaimer similar to “Not connected with or endorsed by the United States Government or the Federal Medicare Program.” (R 500.664(8)).
Group Claims and Enrollment Periods
An ad may not imply that buyers join a group and enjoy special rates or underwriting privileges unless that is true (R 500.665(1)). An individual policy may not be advertised as an introductory, initial, or special offer unless that is true (R 500.666(1)). Enrollment periods for a particular product sold individually are limited (R 500.666(2)):
- At least 3 months between one period’s close and the next one’s opening
- No more than 2 periods in 1 calendar year
- A stated application date not less than 10 days and not more than 40 days from when the period is first advertised
A reduced first premium may not appear more often or more prominently than the renewal premium, and the two must be stated side by side or immediately above or below each other (R 500.666(6)).
Lead Generation
A lead-generating device is any communication directed to the public that is intended to build a list of names and personal information used to solicit Michigan residents for this insurance (R 500.651(j)). A “free health information” card counts if that is its aim.
- The device must carry this language or substantially similar language, in the same size type as the rest and not hidden: “This request for information is insurance related and if you respond you may be contacted in an attempt to sell you insurance.” (R 500.654(6)).
- Before buying a list, you must ask the seller for any device used to build it and obtain a specimen copy of any device disclosed (R 500.654(7)).
- An agent who contacts a consumer from such a lead must disclose that fact in the initial contact (R 500.664(15)).
Files and Compliance
Each insurer keeps a file of its ads for inspection (R 500.668(1)) and files a certificate of compliance, signed by an authorized officer, with its annual statement (R 500.668(3)).
Lesson summary
- Advertising includes prepared sales talks, lead-generating devices, and material used with renewals or delivered with a policy (R 500.651(b)).
- The test is the overall impression on an average person in the audience the ad targets (R 500.654(1)).
- The insurer answers for every ad of its policies, agents’ ads need its prior written approval, and an agent may not solicit with a misleading ad (R 500.652(3); R 500.654(4); R 500.664(14)).
- An invitation to contract must disclose exceptions, reductions, limitations, waiting periods, preexisting condition terms, and renewal terms (R 500.656; R 500.657; R 500.658).
- Ads for limited policies state the limits in type at least 2 points larger than the body of the ad (R 500.655(7)).
- Individual enrollment periods are at least 3 months apart, no more than 2 a year, with an application date 10 to 40 days after first advertising (R 500.666(2)).
- Lead devices carry the required statement, and the agent discloses the lead at first contact (R 500.654(6); R 500.664(15)).
- Agents keep their own agency-generated ads on file for at least 3 years beyond last use (R 500.668(2)).