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Twisting Insurance (What It Means And Why It’s Important)

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What is twisting in insurance?

What are the essential elements you should know!

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Let me explain to you what insurance twisting means and why you should know about it!

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What Is Twisting Insurance

Twisting in insurance terms means the act of pushing or inducing a policyholder to replace existing life insurance with another one based on misrepresentations or misleading information.

In other words, an insurance agent may be “twisting the truth” in order to have you replace a policy for another one that will not bring you value.

When an existing policy is replaced with another, the insurance agent will be compensated in the form of a commission.

As such, dishonest agents who are only looking to profit from a policyholder as opposed to acting in the best interest of the customer may adopt twisting tactics to mislead their clients in order to generate commissions.

To prevent the abuse of unsuspecting customers, the government has adopted laws to ensure the act of twisting when selling life insurance is illegal. 

It’s important to keep in mind that not all life insurance policy replacements will be considered twisting.

In fact, if a customer truly benefits from the replacement transaction, then there could be no doubt that there was nothing illegal about the conduct.

Typically, insurance agents must exercise care and diligence when recommending a client to replace an existing policy, must complete various forms, disclose the pros and cons to the client, and take different measures to ensure the client’s interest is protected.

Twisting Insurance Definition

According to IRMI, twisting in insurance is defined as:

The act of inducing or attempting to induce a policy owner to drop an existing life insurance policy and to take another policy that is substantially the same kind by using misrepresentations or incomplete comparisons of the advantages and disadvantages of the two policies.

As you can see from this definition of twisting in the insurance sector, it means:

  • The act of inducing a policyholder
  • To drop a current policy and take another one
  • That is substantially the same
  • Using acts of misrepresentation or providing incomplete comparisons 

Why You Should Know About Insurance Twisting

It’s important that you know what insurance twisting means so you can protect yourself against unethical insurance agents and practices.

Policyholders that get “twisted” may end up suffering a financial loss or be denied a crucial converge that they were looking to get.

To prevent dishonest practices, the insurance industry has heavily regulated the practice to ensure that the clients are protected.

There are professional codes of conduct rules and norms that insurance agents must comply with designed to protect the policyholder’s best interest.

If you think that you were induced to make a switch or drop a policy and that it was against your best interest, you may file a complaint with your state’s Department of Insurance.

The Department will investigate the matter and take measures against the insurance agent if he or she was found to act illegally.

Furthermore, if you have suffered financial losses, you may want to consult a qualified attorney to help you recover your losses.

Twisting vs Churning In Insurance

What is the difference between twisting and churning in insurance?

The act of twisting refers to a situation when an existing policyholder is pushed to replace their policy and take a new one with a different life insurance company.

On the other hand, the act of churning is to induce a policyholder to drop an existing policy and take a new one with the same insurance company.

What’s common with twisting and churning in insurance is that they are both illegal conducts when the policyholder was misled to drop their existing policy.

For the twisting conduct to be illegal, the following elements are generally considered:

  • Did the insurance agent mislead the client or provide incomplete information?
  • Did the insurance agent make misrepresentations?
  • Was the transaction beneficial for the client?
  • Was the agent motivated by the possibility of getting commission?

In essence, there must be an element of deception in the conduct for the act to be considered as insurance twisting.

Twisting vs Sliding In Insurance

What is the difference between twisting and sliding in insurance?

The term twisting insurance refers to the act of an insurance agent or broker deceiving a policyholder to drop his or her insurance policy and take another one from another company.

On the other hand, sliding refers to the act of selling a policyholder riders or additional coverages when the person did not authorize it or need it in the first place.

When a policyholder did not believe that the riders, additional products, or addendums would increase their insurance premiums and opted for it, then the act may be considered as sliding. 

Twisting Insurance Example

Let’s look at an example of twisting insurance to better illustrate the concept.

Imagine that you have health insurance that you have specifically taken to cover you for a specific type of medication or to protect you against a specific type of condition.

If an insurance agent induces you to switch your policy for another health insurance policy without telling you that the new policy excludes the medications or conditions you need to be covered, then the switch could be detrimental to you.

If the insurance agent concealed this information from the policyholder when making the switch, it could be considered as “twisting”.

Another example would be if you have whole life insurance where your premiums have become too expensive for you to manage.

An insurance agent offers you a term insurance policy convincing you that you’ll save money.

However, when you make the switch, you end up losing the cash value of your whole life insurance or get taxed for the transaction resulting in a worse financial position for you.

If the insurance agent deceived you in switching your whole life for term insurance by hiding the fact that you’d be in a worse financial position, that act could be illegal.

Twisting In Insurance Takeaways 

So there you have it folks!

How do you define twisting insurance?

What does twisting mean in insurance?

In the insurance industry, there is, unfortunately, a small percentage of insurance agents that exercise unethical conduct and do not put the best interest of their clients first.

The act of twisting, insurance twisting, is a scenario when an insurance agent convinces an existing policyholder to surrender an existing policy and take a new one that may not be in their best interest.

By doing so, the insurance agent gets a commission while the client may not see any benefit from the transaction or even be worse off.

If you find insurance agents that are pushing you too hard to sell you an insurance product or you are not comfortable with the information you are getting, it’s best that you get a second opinion or sleep on it before making a decision.

The best thing that you can do to avoid being the victim of twisting in insurance is to ask questions, read all the policy terms and conditions, review the policy disclosure statements, and take time before making any changes to your policy.

The good news is that most of the insurance agents in the industry are honest and hard-working individuals acting with integrity.

I hope that I was able to explain to you what twisting means in insurance, why some may act as such, how it’s different from churning or sliding, and why you should know about it.

Let’s look at a summary of our findings.

What Is Twisting In Insurance

  • Twisting takes place when an insurance agent persuades a policyholder to replace an existing policy with another one through deception or misrepresentation 
  • In essence, the insurance agent is “twisting” the truth so the client accepts to surrender a policy and purchase another one
  • Typically, twisting insurance is not in the best interest of the client 
  • The act of insurance twisting is illegal in most US states where insurance agents can be prosecuted under fraud statutes 
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