South Carolina Life Insurance Practice Exam

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of?

1. Churning

2. Twisting

3. Defamation

4. Misrepresentation

The correct answer is: Twisting

The term that refers to agents persuading insureds to cancel a policy in favor of another one, particularly when it may not be in the best interest of the insured, is accurately identified as twisting. Twisting occurs when an agent misrepresents the nature of a policy with the intent to induce a client to replace their existing insurance with a new policy, thereby benefiting the agent through commissions or other incentives. Twisting is viewed as an unethical practice as it can lead consumers to make decisions that may be detrimental to their financial security or coverage. This behavior undermines the principles of trust and integrity essential in the insurance industry and is often subject to regulatory scrutiny. In contrast, churning refers specifically to the practice of replacing one financial product with another within the same company to generate commissions without providing true benefits to the policyholder. Defamation involves damaging someone's reputation through false statements, while misrepresentation pertains to providing false information about a policy's details or benefits. Each of these alternative terms signifies distinct unethical actions within the insurance context but does not accurately describe the act of persuading a policyholder to switch policies for the agent's gain when it's not in the insured's best interest, which is why twisting is the correct term in this scenario.