A brochure promoting a New York hospital-surgical policy overstates the benefits the policy pays. The brochure also invites prospects to inspect the policy before purchase and promises an unconditional refund of the premium to any dissatisfied purchaser. Under Reg 34 (11 NYCRR Part 215), what is the effect of the refund promise?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under Reg 34 (11 NYCRR Part 215), no advertisement may omit information or use words, phrases, statements, references or illustrations that mislead or deceive purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The regulation expressly provides that making the policy available for inspection before the sale, or offering to refund the premium if the purchaser is not satisfied, does not remedy the misleading statement. The brochure therefore violates Reg 34 despite the refund promise, and the Superintendent of Financial Services may treat its use as an unfair trade practice.
Why the other options are wrong
- A) Reg 34 specifically rejects this cure; the availability of a refund does not remedy an advertisement that misleads consumers about policy benefits.
- C) The regulation draws no distinction between omissions and affirmative misstatements; neither is cured by a refund offer.
- D) The advertising rules apply to the advertisement as published; they are not suspended by any refund or inspection offer.
Memory hook
A refund promise never launders a misleading ad under Reg 34.