Unfair Competition and Deceptive Practices

Coercion

Ref: 10-3-1104(1)(d); 10-3-1105

Producers and insurers may not engage in coercion—using force, intimidation, or unfair pressure—to compel a person to purchase insurance from a specific source.

Participation in any boycott or activity involving coercion and intimidation for the sole purpose of retaining business, or that results in the monopoly of insurance business, is prohibited.

Misrepresentation

Ref: 10-3-1104(1)(a); 10-1-128

Misrepresenting policy terms, benefits, or the financial condition of an insurer is illegal.

• Misrepresentation involving the creation or distribution of policies, quotes, and illustrations designed to provide inaccurate information about the terms and conditions of a policy is prohibited.
• Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.

Providing inaccurate or incomplete information with the sole purpose of inducing lapse, exchange, conversion, forfeiture, or surrender is a violation as well (twisting).

False Advertising

Communication involving the publication of newspapers, magazines, radio, or television that is intended to deliver false information in reference to insurance is a violation of NAIC regulation.

All advertisements and sales materials must be truthful, complete, and not misleading.

Unfair Discrimination

Ref: 10-3-1104(1)(f); 10-3-1104.5

Insurers and producers may not unfairly discriminate between policyholders of the same class and equal risk. Discriminating on the basis of class, race, marital status, or sexual preference is a violation of regulation. Any unfair discriminatory practices intended to directly or indirectly favor an applicant or insured is prohibited.

Differentiation must be based on actuarial data, not race, religion, national origin, or other prohibited factors.

Controlled Business

Ref: 10-2-401(4)

Controlled business is insurance written solely in the interest of the producer, the producer’s family members or business associates. Producers are prohibited from obtaining a Colorado insurance license for the purpose of writing controlled business.

You may sell a policy to yourself or to family members, but you can’t obtain a license for that sole purpose. The majority of business must be derived from the general public.

Defamation

Ref: 10-1-116; 10-3-1104(1)(c)

Making or circulating false, malicious, or derogatory statements about another insurer or producer is prohibited.

• The intentional and malicious circulation of written or oral information intended for the direct or indirect dissemination of derogatory statements is prohibited.
• Publishing and circulating inaccurate information regarding the financial condition of an insurer, person, or competitor in the insurance industry is a violation of NAIC regulation.

Rebates

Ref: 10-3-1104(1)(g)

Colorado licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.

Furthermore, producers in Colorado are also prohibited from receiving any payment for the sale, solicitation, or negotiation of insurance outside of commissions and/or salary.

Sharing commission
Splitting or sharing commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split.

Illegal inducements
In Colorado, it is prohibited to induce the purchase of insurance by offering anything with a monetary value in excess of $10. It is also prohibited to accept anything with a monetary value in excess of $10 from a client.

Any producer participating in this activity will be subject to suspension of their license and a monetary fine.

Unfair Claims Practices

Ref: 10-3-1104(1)(h)

Insurers must adopt fair claims handling standards and promptly pay valid claims.

Unfair practices include:

• The intentional obstruction and delay of claims payment, or the delay of a claims investigation, is a violation of the regulation.
• Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.
• Failure to provide claims without launching a thorough investigation is a violation of the regulation.
• Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of the regulation.
• Denying a claim without conducting a thorough investigation.
• Attempting to settle a claim for less than fair market value.

Colorado Fraud Statute

Ref: 10-1-128; 10-1-129

Knowingly presenting false information in connection with an insurance application or claim is a criminal offense punishable by fines, restitution, and imprisonment.

Any licensed producer who makes false statements containing inaccurate material facts, or who makes false statements on an application for insurance, is in violation of NAIC regulation and likely guilty of insurance fraud.