Indiana State Life and Health Insurance Practice Exam

Which unfair competition practice involves suggesting that an insurance policy is similar to a share of stock?

1. Twisting

2. Intimidation

3. Misrepresentation

4. Sliding

The correct answer is: Misrepresentation

The practice involving the suggestion that an insurance policy is similar to a share of stock is best categorized as misrepresentation. Misrepresentation refers to the act of providing false or misleading information about an insurance policy in order to deceive potential clients. When an insurer or agent claims that a policy functions like an investment or stock, it distorts the true nature of what that policy offers in terms of benefits and risks. In the context of insurance, policies generally provide protection against certain risks rather than acting as investment vehicles. Misrepresentation can lead potential buyers to make ill-informed decisions based on incorrect understandings of the insurance products being presented to them. This not only undermines the integrity of the insurance market but can also significantly harm consumers by leading them to purchase unsuitable products. The other options do not accurately define this particular practice. Twisting typically involves persuading a policyholder to change their coverage by misleading them about the benefits of the new policy versus their current one. Intimidation involves coercing someone into making decisions against their will, and sliding refers to the practice of placing a client into a policy or product without their informed consent. These practices are distinct from misrepresentation, which focuses specifically on presenting false information regarding the nature and characteristics of insurance products.