California Property & Casualty Broker-AgentGeneral InsuranceHard
An insurance producer repeatedly advises clients to cancel their existing policies and purchase new ones from a different insurer, even when doing so would not be in the clients' best interest due to loss of benefits and increased costs. This practice is known as:
- ACoercion
- BTwisting
- CRebating
- DDefamation
Show answer & explanationAnswer & explanation
Correct answer: B. Twisting
Twisting is the unethical act of inducing a policyholder to lapse, forfeit, or surrender an existing policy for the purpose of replacing it with another, to the detriment of the policyholder. This is an unfair trade practice.
Why the other options are wrong
- A. Coercion involves forcing someone to act against their will, often through threats.
- C. Rebating involves offering a prospect a valuable consideration not specified in the policy as an inducement to purchase.
- D. Defamation involves making false, malicious statements about another insurer or producer.
Twisting (Unfair Trade Practice)
An illegal and unethical practice where an insurance producer persuades a policyholder to replace an existing policy with a new one, often to the policyholder's detriment, for the purpose of earning a new commission.
- Involves replacement of an existing policy.
- Must be to the detriment of the policyholder.
- Often driven by the producer's desire for new commissions.
- Considered an unfair trade practice and is illegal.
Memory trick: Be DIRT-y, it's illegal: Defamation, Inducement, Rebating, Twisting.