Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOEasy
An insurance company attempts to persuade a policyholder to cancel an existing policy and purchase a new one with the same insurer by using misrepresentations or incomplete comparisons. This practice is known as:
- AChurning
- BCoercion
- CDefamation
- DTwisting
Show answer & explanationAnswer & explanation
Correct answer: A. Churning
Churning refers to the practice of inducing a policyholder to replace an existing policy with a new one from the same insurer, often to generate new commissions, to the detriment of the policyholder.
Why the other options are wrong
- B. Coercion involves forcing someone to act against their will, typically through threats or undue pressure.
- C. Defamation involves making false statements that harm an insurer's or agent's reputation.
- D. Twisting involves replacing a policy from one insurer with a policy from a different insurer.
Churning
An unethical practice where a policyholder is induced to replace an existing policy with a new one from the same insurer, primarily to generate new commissions.
- Involves the SAME insurer
- Often detrimental to policyholder
- Violation of Unfair Trade Practices Act
Memory trick: Churning means the same cream, just whipped again for profit.