Arizona Life and Health Practice Exam

Which of the following is considered to be an unfair trade practice?

1. A producer who sells insurance to an individual by means of threat

2. A company that offers discounts to lure customers

3. A broker who shares commissions with clients

4. A firm that provides insurance quotes based on personal data

The correct answer is: A producer who sells insurance to an individual by means of threat

A producer who sells insurance to an individual by means of threat is indeed considered an unfair trade practice because it involves coercion and intimidation, which violate ethical standards in the insurance industry. Such behavior undermines the principle of informed consent, where individuals should make decisions about insurance based on understanding and free will, rather than fear or pressure. Unfair trade practices, as defined by regulatory bodies, include actions that deceive, coerce, or exploit consumers, ultimately eroding trust in the insurance market. Selling insurance through threats is a blatant abuse of power and misrepresentation of the product’s intent, making it a clear violation of fair trade policies. In contrast, offering discounts to lure customers can be a legitimate marketing strategy if done transparently and ethically. Sharing commissions with clients might enhance transparency and trust in broker-client relationships, while providing insurance quotes based on personal data, when done in compliance with privacy regulations, is a common practice in the industry.