Misrepresentation is the act of making, issuing, circulating or causing to be issued or circulated, an estimate, illustration, circular or statement of any kind that does not represent the correct policy terms, dividends or share of the surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
Simply put, any written or oral statement that does not accurately describe a policy's features, benefits or coverage is considered a misrepresentation. A misrepresentation involves an untrue, incomplete or misleading statement.
Seems pretty cut and dry, doesn't it? However, there are situations in which a producer may inadvertently misrepresent a product and not even be aware of it at the time. A simple thing such as enthusiasm may be to blame. A producer may be so excited about a new product and so convinced that it is in the client's best interest that he/she may overlook or sidestep any potential drawbacks. Misrepresentation is most likely to occur during the presentation.
Some of the most common examples of misrepresentation are:
- Misrepresenting a policy's provisions or benefits or how the policy can be expected to perform over time;
- Overstating promises and guarantees;
- Giving the impression that policy dividends or cash value projections (other than those that are, in fact, guaranteed, as stated in the policy) are guaranteed;
- Using inaccurate or misleading information or numbers that misrepresent the financial condition of an insurance company, a broker-dealer or another producer;
- Making any statements or giving reassurances of any kind about coverage, the policy or premiums that are not true or that cannot be supported clearly by the policy;
- Engaging in the most serious type of misrepresentation - intentional fraud.
Also, an agent is prohibited from making any misrepresentation as to the financial condition of any insurance company, or as to the legal reserve system upon which any life insurance company operates, or use any name or title of any policy, which misrepresents the true nature thereof.
Knowledge is the key to avoiding misrepresentation.