Restraint, Restrictions & Other Prohibited Practices

Unfair Inducements (Rebating)

No insurance company, employee, or intermediary may influence another person to buy an insurance policy, or to terminate an existing one, by offering benefits or making agreements that are not specified in the policy. This is what most states call “rebating” — kicking back a portion of the commission to the buyer, or throwing in a side benefit, to close the sale.

The prohibition does NOT apply to reducing premiums because of expense savings (including commission reductions) resulting from any form of mass marketing. Genuine cost savings passed through to the buyer aren’t rebates. What’s prohibited is the off-the-books inducement.

A related rule: no intermediary, broker, or insurer may absorb the premium tax for unauthorized insurance purchased under s. 618.43, Wis. Stat. The policyholder is responsible for that tax, and the intermediary can’t soften it by paying it themselves.

Unfair Discrimination

No insurance company may charge different policyholders different premiums, or provide different terms of coverage, unless the differences are based on classifications that relate to the nature and degree of risk covered or the expenses involved. Rates that are averaged among a group, blanket, or franchise policy are not unfair discrimination. And the terms of a group or blanket policy are not unfair just because they’re more favorable than a similar individual policy.

The principle is intuitive once you state it. Insurance pricing is necessarily discriminatory in the technical sense — drivers with three DUIs pay more than drivers with clean records, because that’s actuarially justified. The unfair kind of discrimination is the kind that’s NOT actuarially justified — charging a woman more than a man for the same coverage when sex isn’t a relevant risk factor, or denying coverage to people in a particular zip code without underwriting reason.

Sex Discrimination Specifically

The administrative code (s. Ins 6.55) forbids denying benefits or refusing coverage based on sex, and seeks to eliminate unfair underwriting based on sex. The following are prohibited as unfair trade practices for any policy delivered or issued in Wisconsin:

• Refusing or canceling coverage, or denying benefits, on the basis of the applicant’s or insured’s sex.
• Restricting, modifying, or reducing the benefits, term, or coverage on the basis of sex.

Examples of unfair sex discrimination:

• Denying coverage to women employed at home, part-time, or by relatives, when coverage is offered to men similarly employed.
• Denying benefits offered by policy riders to women when the riders are available to men.
• Treating complications of pregnancy differently from any other sickness.
• Restricting, reducing, modifying, or excluding benefits payable for treatment of the genital organs of only one sex.
• Offering lower maximum monthly benefits to women than to men in the same underwriting, earnings, or occupational classifications under disability income contracts.
• Offering more restrictive benefit periods or definitions of disability to women than to men in the same classifications.
• Establishing different conditions by sex under which the policyholder may exercise benefit options.

Other prohibited discrimination categories addressed by administrative rule include physical or mental impairment, sexual orientation (s. Ins 6.67), and geographic location or age of risk (s. Ins 6.68).

Restraint of Competition

It’s illegal to commit or agree to take part in any act of boycott, coercion, or intimidation that tends to unreasonably restrain the insurance business, or that tends to create a monopoly. This applies to anyone who is or should be licensed in Wisconsin, their employees and agents, persons whose main interest is competing in the same business, and anyone acting on their behalf.

In plain terms: don’t conspire with competitors to fix prices, divide territories, or shut out new entrants. Don’t threaten to boycott an insurer for working with a competing intermediary.

Unfair Restriction of Choice of Insurer

No one who requires insurance coverage as a condition for concluding a contract — or for exercising a right under a contract — may restrict the buyer’s choice of insurer. The person requiring the coverage may reserve the right to disapprove the buyer’s selection on reasonable grounds, but the form of the corporate organization of the insurance company (whether stock, mutual, or otherwise) is not a reasonable ground for disapproval.

Classic example: a lender can require borrowers to carry hazard insurance on a mortgaged home. The lender can reasonably disapprove an insurer that’s financially weak. The lender cannot say “you must buy through our preferred agency.”

Extra Charges

In financing transactions, no person may make any charge other than premiums and premium financing charges for the protection of property or a security interest in property, when the charge is a condition for the financing of a purchase of the property or the lending of money on the security of an interest in the property.

Practically, this stops lenders from layering on fictitious “insurance protection” charges that go straight to their pockets.

Influencing Employers

No insurance company, intermediary, employee, or agent may, in connection with an insurance transaction, influence or attempt to influence any employer not to hire a person or to fire a person arbitrarily or unreasonably. This is most often about workers’ compensation claims — an insurer or agent leaning on an employer to fire a worker who filed a comp claim is prohibited from doing so.

Use of Official Position

No one holding an elective, appointive, or civil service position in federal, state, or local government may use decision-making power to coerce a person to purchase an insurance policy from a particular intermediary or company.

If an intermediary is also a public official — say, a city council member who also runs an insurance agency — they can’t leverage their official role to steer business.

Returning Indicia of Agency

No agent may refuse or fail to return all indicia of agency promptly to any insurance company they represent, whenever the company demands it. “Indicia of agency” means business cards, letterhead, rate manuals, policy forms, brochures, and any other materials that signal you represent the insurer. When the agency relationship ends, the materials go back.

Additional Unfair Practices Defined by Rule

The Commissioner can define additional unfair trade practices by rule after finding they’re misleading, deceptive, unfairly discriminatory, an unfair inducement, or an unreasonable restraint of competition. Current rules that define unfair trade practices include:

• s. Ins 2.07 — replacement of life insurance policies or annuity contracts (disclosure requirements).
• s. Ins 2.08 — special policies and provisions (prohibitions, regulations, and disclosure).
• s. Ins 2.09 — separate and distinct representations of life insurance.
• s. Ins 2.12 — exceptions to unfair discrimination.
• s. Ins 2.14 — life insurance solicitation.
• s. Ins 2.15 — annuity benefit solicitations.
• s. Ins 3.26 — unfair trade practices in credit life/credit accident and health insurance.
• s. Ins 3.27 — advertisements of and deceptive practices in accident and health insurance.
• s. Ins 3.29 — replacement of accident and sickness insurance.
• s. Ins 3.39 — standards for disability insurance sold to Medicare eligibles.
• s. Ins 3.46 — standards for long-term care insurance and coverage.
• s. Ins 6.09 — prohibited acts by captive agents of lending institutions and others.
• s. Ins 6.54 — prohibited classification of risks for rating purposes.
• s. Ins 6.55 — discrimination based on sex.
• s. Ins 6.60 — prohibited business practices.
• s. Ins 6.67 — unfair discrimination based on physical/mental impairment or sexual orientation.
• s. Ins 6.68 — unfair discrimination based on geographic location or age of risk.
• s. Ins 20.01 — home solicitation selling.

Effect of the Intermediary’s Appointment on the Insurer

Every insurer is bound by the acts of its agent performed in Wisconsin within the scope of the agent’s authority. The insurer remains bound while the agency contract is in force, OR until the insurer has made reasonable efforts to recover from the agent its policy forms and other indicia of the agency. “Reasonable efforts” includes a formal written demand for the return of the indicia and notice to the Commissioner if the agent doesn’t comply.

So even after the appointment ends, if the agent is still walking around with old policy forms and the insurer hasn’t made a proper effort to retrieve them, the insurer might still be bound. That’s why the indicia return rule has teeth.