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13.3 Marketing Considerations

Advertising​

The purpose of advertising regulation is to ensure that information presented to the public is complete and accurate, to prevent unfair competition, and to establish minimum standards of conduct. In most states, insurers are required to submit advertisements to the Department of Insurance for review prior to their use.

Advertisements include any printed or published materials, audiovisual content, and descriptive literature. This encompasses newspapers, magazines, radio and television scripts, billboards, sales presentations, and personal testimonials.

Advertising requirements include:

  • Insurers are responsible for ensuring the accuracy of any personal testimonials used in advertisements
  • Statistical data may be included if it is accurate and the source is clearly identified
  • Agents must disclose the full name of the insurer when advertising a specific policy
  • Both the insurer and the agent are held accountable for any misleading advertisements
  • Disclosures must be made if the insurer has any control over a group endorsing a product
  • Comparisons of similar products must be complete, including rates, policy provisions, benefits, and dividends
  • The use of isolated or unusually large claim payments to promote a policy is prohibited

Regulatory Jurisdiction/Place of Delivery​

When a group insurance contract covers individuals residing in multiple states, it is necessary to determine which state has regulatory jurisdiction over the contract.

It is generally recognized that the state in which the group contract is delivered to the policyowner has primary regulatory authority. The contract must comply with the laws of that state, even if certificates of insurance are issued in other states. However, regardless of the governing state, the policy must also meet the benefit requirements of each state where covered employees live or work.

If the state of delivery does not have a meaningful connection to the insurance transaction, other states may assert regulatory authority. As a result, the place of delivery is generally required to have a valid relationship to the policyowner, such as:

  • The state where the policyowner’s principal place of business is located
  • The state in which the policyowner is incorporated
  • Any state where an employer or labor union participating in a trust is located
  • The state where the largest number of covered individuals are employed

Although the policyowner may have multiple options for the place of delivery, insurers typically prefer to issue a group contract only in a state where a corporate official is present to accept the contract and where the primary administrative functions of the policy are conducted.

Quiz​

1. What is the primary purpose of advertising regulation in insurance?

A. To increase sales commissions

B. To ensure accurate information and prevent unfair competition

C. To eliminate all advertising

D. To reduce policy benefits

Correct Answer: B

Rationale: Advertising regulation ensures information is accurate, prevents unfair competition, and establishes standards of conduct.

2. Which of the following must be true when using statistical data in an insurance advertisement?

A. It must be approved by the insured

B. It must guarantee future results

C. It must be accurate and include a cited source

D. It must only be used in television ads

Correct Answer: C

Rationale: Statistical data is allowed only if it is accurate and the source is clearly identified.

3. Who is held responsible if an insurance advertisement misleads the public?

A. Only the agent

B. Only the insurer

C. Both the insurer and the agent

D. The Department of Insurance

Correct Answer: C

Rationale: Both the insurer and the agent are accountable for misleading advertisements.

4. Which state typically has primary regulatory jurisdiction over a group insurance contract?

A. The state where the employee lives

B. The state where claims are filed

C. The state where the contract is delivered

D. The state where the insurer is headquartered

Correct Answer: C

Rationale: The state of delivery to the policyowner generally has governing authority over the contract.

5. Which of the following is an acceptable basis for determining the place of delivery of a group contract?

A. The state with the lowest premium rates

B. The state where the most advertisements are run

C. The state where the policyowner’s principal place of business is located

D. The state with the fewest regulations

Correct Answer: C

Rationale: The place of delivery must have a valid relationship, such as the policyowner’s principal place of business.