What constitutes misrepresentation in the context of insurance?

In the context of insurance, misrepresentation occurs when an agent or insured provides misleading or false information related to the insurance coverage or the applicant's eligibility. Guaranteeing a policy's dividends falls squarely into this definition, as agents do not have the authority to guarantee specific returns or dividends on policies, particularly since these amounts can be influenced by various factors beyond their control.

When an agent makes such a promise, they are giving potential policyholders an inaccurate portrayal of what they can expect from the policy, leading the insured to form expectations based on false information. This can result in significant legal implications for both the agent and the insurance company.

In contrast, providing accurate information during the application process does not constitute misrepresentation; rather, it aligns with the principles of transparency and honesty that underpin all insurance transactions. Similarly, failing to disclose previous claims or making alterations to policy documents could indeed be problems but are generally understood as issues of non-disclosure or unauthorized modification, rather than misrepresentation per se. These actions might lead to complications within a policy but do not encapsulate the essence of misrepresentation in the same way that guaranteeing dividends does.