Unfair trade practices act refers to model legislation developed by the NAIC and adopted, with variations, by many states to prohibit deceptive, misleading, or abusive insurance sales and marketing practices. These laws typically ban misrepresentation, false advertising, rebating, twisting, churning, unfair discrimination, and other conduct that harms consumers or distorts competition. State insurance departments enforce unfair trade practices acts through investigations, fines, license suspensions, and other disciplinary measures. For producers, violations can lead to severe professional consequences and damage to reputation.

Advisors learn about unfair trade practices acts in licensing and continuing education courses and are expected to understand how these rules apply to day-to-day activities. Compliance departments design policies, advertising review processes, and replacement procedures to align with state standards. When complaints arise, regulators may use unfair trade practices statutes as a basis for action. Advisors who follow transparent, client-centered sales processes and avoid prohibited inducements such as rebating are less likely to run afoul of these laws. Understanding unfair trade practices acts helps advisors recognize boundaries, maintain ethical standards, and build long-term, regulator-approved practices.