West Virginia State Life Insurance Practice Exam

Which unfair trade practice involves misleading clients about policy dividends?

1. Coercion

2. Misrepresentation

3. Fraud

4. Deceptive Advertising

The correct answer is: Misrepresentation

Misrepresentation is the correct choice because it specifically refers to the act of providing false or misleading information to clients about the terms, benefits, or features of an insurance policy, including policy dividends. In the context of life insurance, misrepresentation can occur when an agent exaggerates the dividends that a policy will pay or provides incorrect information about how dividends are calculated and distributed. This can mislead clients into making uninformed decisions based on inaccurate expectations. Understanding misrepresentation is crucial for maintaining ethical standards within the insurance industry. It underscores the importance of transparency and honesty in the communication between agents and clients, ensuring that clients can make well-informed choices regarding their insurance policies. The other options relate to different concepts. Coercion involves pressuring clients into making decisions, while fraud includes intentional deceit for personal gain, demonstrating a more severe ethical violation. Deceptive advertising generally refers to misleading promotional materials rather than direct interactions with clients about their policies.