State RegulationsMI specificDifficulty 2/5
At a sales presentation in Saginaw, a producer tells a prospect that a competing insurer "is about to become insolvent," knowing the statement is false and intending to discourage the prospect from buying that competitor's policy. Which unfair trade practice has the producer committed?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.C.L. 500.2009 of the Michigan Insurance Code prohibits defaming any person, especially a competitor, by false or maliciously critical statements about its financial condition. The producer knowingly spread a false insolvency claim about a rival insurer to steer the sale, which is the core of the defamation offense, and the director can act against the producer's license through DIFS.
Why the other options are wrong
- A) Rebating under M.C.L. 500.2024 requires giving the applicant something of value not specified in the contract, and nothing of value was offered here.
- B) Coercion under M.C.L. 500.2012 involves pressure or threats forcing a transaction; a false insolvency rumor is a defamation problem, not physical or transactional coercion.
- C) Twisting under M.C.L. 500.2005(f) involves inducing the surrender or lapse of the prospect's own existing policy, which did not occur in this scenario.
Memory hook
Rumors about a rival's solvency = defamation under 500.2009.