State RegulationsMI specificDifficulty 2/5
An advertisement for a Michigan accident and health policy proclaims that the insurer is “the largest and most financially secure company in the nation,” a claim the insurer knows misstates its financial condition. Under Michigan law, this advertisement is unlawful because it does what?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Misrepresenting the financial condition of any person is an unfair trade practice under M.C.L. 500.2005 of the Michigan Insurance Code, and the Michigan Administrative Code advertising rules R 500.651–.669 carry that prohibition into accident and health advertisements, which may not misstate benefits, terms, or financial condition. A known false claim of financial strength is designed to induce purchase on a false premise, and DIFS can sanction the insurer for using it.
Why the other options are wrong
- A) The unlawfulness comes from the false financial claim, not from the act of comparison itself.
- C) Nothing in the scenario indicates the testimonial is the problem, and uncompensated testimonials are not the basis of the violation described.
- D) A missing license number is a formatting issue, not the misrepresentation that makes this advertisement unlawful.
Memory hook
Big talk about solvency is still misrepresentation.