Twisting
An illegal practice where an insurance agent or broker uses misleading information to convince a policyholder to cancel an existing policy and purchase a new one. This typically benefits the agent through new commissions while harming the customer financially.
Example
“The state insurance commissioner fined the agent $50,000 for twisting after he convinced elderly clients to surrender their whole life policies by falsely claiming their existing coverage was inadequate.”
Memory Tip
Remember 'TWIST' - Tricking With Incorrect Stories for Transactions - agents twist the truth to make unnecessary sales.
Why It Matters
Twisting can cost consumers thousands in lost cash value, surrender charges, and higher premiums based on older age and health changes. Understanding this practice helps consumers recognize and avoid predatory sales tactics that prioritize agent commissions over client welfare.
Common Misconception
Some people believe all policy replacements constitute twisting, but legitimate replacements that genuinely benefit the customer are legal and appropriate. The key difference is whether the recommendation is based on truthful information and serves the client's best interests.
In Practice
An agent tells a 55-year-old with a 10-year-old whole life policy worth $75,000 that it's 'worthless' and pushes a new policy. The client surrenders the old policy, paying $8,000 in surrender fees, loses $15,000 in accumulated cash value, and faces higher premiums due to increased age - costing roughly $23,000 while the agent earns a $3,000 commission.
Etymology
The term originated in the early 1900s insurance industry, describing how unscrupulous agents would 'twist' facts and misrepresent information to manipulate policy changes for personal gain.
Common Misspellings
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Related Terms
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See Also
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