insurance

Twisting

Twisting is an illegal insurance practice where an agent or broker uses misleading information or deception to convince a policyholder to cancel their existing coverage and purchase a new policy. This practice typically benefits the agent through new commissions while harming the consumer.

Example

“The insurance commissioner fined the agent $50,000 for twisting when he falsely told customers their current policies were about to be cancelled to sell them expensive new coverage.”

Memory Tip

Twisting = Twisting the Truth - agents twist facts to make unnecessary policy changes seem necessary.

Why It Matters

Twisting can cost consumers thousands of dollars in unnecessary fees, lost benefits, and higher premiums while resetting waiting periods and contestability periods. Recognizing twisting helps consumers avoid predatory sales practices and maintain appropriate coverage at fair prices.

Common Misconception

Many consumers believe that newer insurance policies are automatically better than older ones, making them vulnerable to twisting. In reality, older policies often have valuable features, lower premiums, or grandfathered benefits that may be lost when switching to new coverage unnecessarily.

In Practice

An unethical agent tells Mrs. Johnson her 15-year-old whole life policy with $500,000 coverage and $75,000 cash value is 'outdated' and convinces her to surrender it for a new policy. She loses $15,000 in surrender charges, restarts her two-year contestability period, and pays higher premiums at her current age, costing her approximately $35,000 over her lifetime.

Etymology

The term 'twisting' in insurance comes from the idea of 'twisting the truth' or manipulating facts. It became recognized as an illegal practice in insurance regulation during the early 1900s as consumer protection laws developed.

Common Misspellings

twisting insurenceinsurance twistingtwisttingtwisting scam

Related Terms

Misrepresentation

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