Under Pennsylvania's Unfair Insurance Practices Act, which of the following describes misrepresentation?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Misrepresentation under 40 P.S. § 1171.5(a)(1) means making, issuing, or circulating any statement or illustration that is false or misleading about the terms, benefits, or advantages of a policy, and 40 P.S. § 1171.5(a)(2) reaches false statements made with intent to induce a purchase, lapse, forfeiture, or surrender. The parallel producer-conduct provisions at 40 P.S. § 310.47 and 40 P.S. § 310.48 reinforce the rule. The practical consequence is that a producer's verbal pitch about what a policy pays is regulated speech: exaggerating benefits to close a sale is an unfair trade practice the Pennsylvania Insurance Department can act on.
Why the other options are wrong
- A) Slow delivery of an issued policy may breach service obligations, but it is not the unfair-practices definition of misrepresentation, which targets false statements that induce transactions.
- B) Unjustified rate differences between similarly situated applicants describe unfair discrimination, a separate enumerated practice, not misrepresentation.
- D) Replacement itself is a regulated but lawful transaction; it becomes twisting only when induced to the policyholder's detriment, and broader benefits at higher cost is not automatically a misrepresentation.
Memory hook
Say it false to close the sale, and Pennsylvania calls it misrepresentation.