Insurance is a highly regulated industry in the United States. Every aspect is impacted by state laws and regulations—from the companies designing and issuing the products, to the management of the assets underlying the guarantees, to the initial advertisements and sales, to policy management and claims handling. Although federal laws and regulation also apply to certain aspects of some insurance products, state laws primarily govern the day-to-day activities for all insurers.
Each state’s laws cover essentially the same topics, with varying language and details on the specifics. To assist state regulators and encourage more state-by-state uniformity, the National Association of Insurance Commissioners (NAIC) creates and publishes Model regulations on common issues. The NAIC is a non-governmental organization made up of the chief insurance regulators from all fifty states, the District of Columbia, and five U.S. territories.
Once the NAIC releases a Model, it is up to the states to adopt it, either through legislation or executive regulation. States are generally free to pick-and-choose which Models, and which sections within those Models, become law. When the NAIC amends an existing Model, states generally need to proactively implement those changes; or without any state action, the existing law (including prior versions of a Model) remain in force.
Some states enact laws on the same topics covered by a Model but use different language. These distinctions can make it challenging for insurance companies to ensure that they comply with applicable laws.
One topic covered in all jurisdictions is a prohibition against unfair trade practices. The Unfair Trade Practices Acts (UTPA) are wide-ranging and primarily address the relationship between the public and the insurer or insurance producer/agent. Areas covered by UTPAs are expanded upon in additional regulations, with the UTPA as the basis for the more detailed requirements.
The NAIC Model (Model 880) specifically applies to any entity “engaged in the business of insurance.” This definition covers all insurance companies, regardless of which products they offer. The NAIC amends Model 880 periodically, most recently in 2024. While the most recent version has not yet been enacted, the prior Model is law in all but five states—Alabama, Illinois, Oregon, Utah, and Wisconsin—that have different UTPA provisions.
As noted, the Model UTPA is multi-faceted. With respect to advertising, it sets forth activities that constitute unfair trade practices, for which penalties are possible. Boiled down to the basics, it is an unfair trade practice for an insurer (or agent) to engage in:
“False information” is “any assertion, representation, or statement with respect to the business of insurance, or with respect to any insurer in the conduct of its insurance business, which is untrue, deceptive, or misleading.” It is critical that this definition is part objective and part subjective. If a consumer could reasonably be misled by information, even if it is technically true, it could still be considered as false and therefore a violation of the Model UTPA.
The Model UTPA details that the prohibition against misrepresentations and false statements covers, in part:
The prohibition against false information has an exhaustive list of the types of communications impacted, including any publication, internet posting, radio, or television airing. Essentially, there is no means of communication to the public that isn’t covered. A highway billboard or Instagram post is advertising to the same extent as a 20-page mailing.
In addition to these the broad advertising prohibitions, the NAIC Model UTPA also includes specific provisions relating to advertising. Specifically:
In addition to the UTPA, the NAIC also has Models that address advertising in specific insurance market. We will address a number of these items in subsequent posts. These specific regulations are in addition to the basic advertising rules in the UTPA.
It is the obligation of the insurer issuing an advertisement to comply with these prohibitions. In addition, an insurer is also responsible for any advertisement, even one created by a producer or agent, that mentions the insurer’s products.
An insurer should have a system to review all advertisements to ensure that nothing contains false, misleading, or deceptive information and that none of the other specific prohibited terms are included. Some states require insurers to file an annual certificate of compliance indicating that the advertising is in compliance with the provisions of the state law; the system of review can internally support this filing. Many insurers have a schedule for review of advertisements to ensure that the facts remain accurate; the time for review will depend on the content of the advertisement and will generally be more frequently if the advertisement includes premium rates.
How does an insurer know if an advertisement contains a misrepresentation? Although consumer products can freely claim to be ‘best,’ ‘five star,’ or ‘new and improved,’ in the regulated world of insurance advertisements, superlatives can be a misrepresentation. Instead, insurance advertisements need to be precise. Each statement should be verified for accuracy, and references that involve statistics or ratings should include information about the source.
The Model UTPAs definition of “false” is broadly defined to include statements that are misleading. This is not a true/false test, but how it looks to the intended audience of the advertising and not just the words used. The determination of what is “false” considers the words in context. An insurer needs to consider whether a disclosure is sufficient to alleviate the risk so that a technically true statement isn’t considered false because it could be misleading.
Consider the common marketing phrase “A policy to fit every budget.” This can be misleading if it is read to assert that everyone applying will qualify for coverage when it is not the case. If there is a footnote or disclosure that specifies that “Individuals must qualify for coverage based on our underwriting standards,” an insurer may posit that disclosure is sufficient to cure the risk of the sentence being misleading. Or the insurer could decide to change the sentence to “Our policies fit within most budgets,” thus alleviating the potential problem that the sentence is misleading. Yet, marketing professionals may argue that the new sentence isn’t a strong enough advertisement. It is these seemingly simple questions that underly compliance with advertising concerns.
Insurance companies are subject to market conduct examinations from state regulators. The examinations may cover some or all aspects of a state UTPA, depending on specific circumstances. After an examination, the state regulator will generally issue a report detailing areas examined and whether any violations were found. A state regulator can assess fines for violations as well as cease and desist orders, depending on the scope of the issue. In addition, certain states make the examination reports available to the public, and they may be reported by the press. Thus, there is not only financial risk but also reputational risk for an insurer to err in compliance with the advertising rules.
There are a range of potential risks. For example, a 2024 Judgment issued by the Commonwealth of Massachusetts assessed a civil penalty of $115,142,000 plus compensatory damages of $50,095,562 to impacted consumers against an insurer for a range of offenses, including numerous issues relating to advertising of the company and its products.
State regulators can also cite an insurer for a small number of errors, such as when the New York State Department of Financial Services determined in one insurer’s 2016 Market Conduct Report that there were two advertising violations, including one that was present in less than 5% of the files examined and a second one that cited the insurer for failing to include the name of the city of its home office in its advertising.
Advertising compliance for insurance companies isn’t difficult to follow. It is an important and necessary step that insurers need to attend to as they reach out to the public concerning their products. It helps build trust in the information delivered, the firms, and the industry.
Published May 7, 2025
The opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates. This information is general and educational in nature, is for informational purposes only, and should not be construed as legal advice. No warranties are made regarding the information and recipients should not act or refrain from acting on the basis of the information.
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