State RegulationsAZ specificDifficulty 2/5
A lender tells commercial borrowers that their loan applications will be denied unless they buy their life insurance from one particular producer. Under Arizona insurance law, this arrangement is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Tying the grant of credit to the purchase of insurance from a particular source coerces the borrower's insurance decision, and A.R.S. 20-446 prohibits coercion and intimidation in the business of insurance. The borrower's choice must be free; using financial leverage to force a sale is exactly the strong-arm practice the statute forbids.
Why the other options are wrong
- A) Wrong because the identity of the coercing party does not matter; the coercion of an insurance transaction violates A.R.S. 20-446.
- C) Wrong because premium competitiveness does not cure the coercion; the buyer's choice is being forced, which A.R.S. 20-446 prohibits regardless of price.
- D) Wrong because the arrangement coerces an insurance purchase, bringing it within the Director's enforcement authority under A.R.S. 20-446.
Memory hook
Buy my policy or no loan = coercion, banned by 20-446.