Twisting
Twisting is an illegal insurance practice where an agent induces a policyholder to replace an existing policy with a new one through misrepresentation or incomplete comparison, often to generate new commission.
Exam Tip
Twisting = misrepresenting to replace coverage. Churning = same thing but with own company's policies. Both are ILLEGAL.
What is Twisting?
Twisting is an unfair trade practice in insurance where an agent uses misrepresentation, deception, or incomplete comparisons to convince a policyholder to replace an existing policy with a new one. The practice is driven by the agent's desire to earn new sales commissions.
How Twisting Works
- Agent identifies client with existing policy
- Agent presents misleading comparison favoring new policy
- Agent omits important facts about existing policy benefits
- Client replaces adequate coverage with potentially inferior policy
- Agent earns full first-year commission on new sale
Examples of Twisting
| Misrepresentation | Reality |
|---|---|
| "Your old policy is worthless" | Policy has substantial cash value |
| "This new policy is much better" | Benefits may be comparable or worse |
| "You'll save money" | Ignoring surrender charges and new costs |
| "Your coverage will increase" | New policy may have exclusions |
Twisting vs. Churning
| Practice | Definition | Typical Target |
|---|---|---|
| Twisting | Replace competitor's policy | External policies |
| Churning | Replace own company's policy | Internal policies |
Warning Signs
- Pressure to cancel existing policy immediately
- Incomplete comparisons of coverage
- Focus on one benefit while ignoring others
- Agent criticizing current insurer
- Rush to sign without review period
- Surrender charges not disclosed
Why Twisting is Harmful
| To Client | To Industry |
|---|---|
| New contestability period | Lost trust |
| Loss of cash value | Unfair competition |
| Higher premiums (age-based) | Regulatory scrutiny |
| Potential coverage gaps | Increased complaints |
| Surrender charges from old policy |
Penalties for Twisting
- License revocation or suspension
- Fines and penalties
- Civil lawsuits from clients
- Criminal charges in severe cases
- Industry sanctions
Consumer Protection
| Protection | Description |
|---|---|
| Replacement Forms | Required comparison documents |
| Free Look Period | Time to review new policy |
| Existing Insurer Notice | Old company notified of replacement |
| Policy Summary | Detailed comparison provided |
Study This Term In
Related Terms
Rebating
InsuranceRebating is an illegal insurance practice where an agent offers part of their commission or other inducements to a prospect as an incentive to purchase a policy, violating state insurance laws designed to ensure fair competition.
Contestability Period
InsuranceThe contestability period is typically the first two years of a life insurance policy during which the insurer can investigate and deny claims based on material misrepresentation or fraud in the application.
Free Look Period
InsuranceThe free look period is a mandatory time frame (typically 10-30 days) after receiving an insurance policy during which the policyholder can cancel for a full refund of premiums paid, no questions asked.