Final answer:
Insurance agents must avoid ambiguous and exaggerated claims that could be misleading or false advertising. The FTC allows some exaggeration but insists that factual claims be true. Consumers are advised to be cautious through the principle of 'caveat emptor', but agents have an ethical duty to be truthful.
Step-by-step explanation:
It is considered an unfair trade practice for insurance agents to circulate information that could be misleading or constitute false advertising. Some characteristics that may indicate such information include ambiguity and exaggeration. For example, marketing a policy by implying it offers comprehensive coverage without clarifying exclusions can be misleading. Furthermore, making unverifiable claims about the benefits or returns of an insurance product could be seen as false advertising.
According to the rules enforced by the Federal Trade Commission (FTC), while a certain degree of puffery or exaggeration is permissible to highlight the general delight of using a product, any claim presented must be factual. Hence, an insurance agent must avoid statements that are misleading or untrue. The principle of caveat emptor or 'let the buyer beware' emphasizes the responsibility of the consumer to be vigilant, but it does not absolve agents of the ethical requirement to present accurate and complete information.