What is twisting in insurance? When shopping for insurance, you want to strike a balance between the right level of coverage, a deductible you can afford, and reasonable premiums.
Nobody wants to pay a lot for premiums, but they also don’t want to be stuck with an affordable roof repair after the monsoon season. That is why many people who buy insurance turn to an agent to help them choose a policy.
Unfortunately, some agents engage in an unethical and often illegal practice called insurance twisting. If you’re concerned about getting the best deal on your policy, you need to learn more about what is twisting in insurance policy and how to protect yourself from them.
What Is Twisting In Insurance?
An insurance twisting is when an agent convinces an insured to cancel their existing policy and take out a new one that is not in their best interest. Some agents earn commissions on the sale of their policies and may be motivated to increase their commissions by selling someone a policy they don’t need.
What Is The Definition Of Twisting In Insurance?
Simply convincing him to replace his homeowner’s insurance policy with another does not distort the insurance policy. After all, you have probably gone to a broker for help with purchasing a new policy. You may be refinancing or adding an addition, and it’s just a good time to review your existing policy.
For the sale of a new policy to meet the definition of misrepresentation of insurance, the agent must have committed fraud to sell the policy. By “twisting” the truth, you end up buying a policy that is not a better replacement for your existing policy. Another aspect of selling a new policy that makes it skewed is whether a higher commission or profit motivates the agent, not their interests.
Whatever the reason, if an agent sells you a policy and twists the truth, you are not buying the best policy for your needs. To qualify as a torsion, there must be an element of cheating, where the agent is cheating on the insured.
Example Of Twisting In Insurance
Example Of Twisting In Life Insurance
What would be an example of intermediary insurance that would fit with your life insurance policy?
Let’s say you bought a lifetime policy with an accrued cash value.
Full life insurance, or premium return insurance, is more expensive than life insurance, and the premiums may have increased too much for your budget.
You contacted an agent for help choosing a cheaper policy that still protects your family.
The agent convinces him to cancel his entire life insurance policy and buy it for life. This will save you money on premiums, but what they don’t say is that you will lose the cash value of your entire life insurance policy or pay tax on it. These taxes can negate any premium savings.
Reputable agents will explain the pros and cons of any policy change you are considering, including any tax implications. They won’t leave out any details to get to a sale.
Example Of Twisting In Home Insurance
Home insurance can be confusing – does your policy cover a detached garage or an extension? What about your new pool, need to increase your liability coverage?
An example of a home insurance twisting would be if you are building a new garage and call your agent to ask if it is covered. If they say no and tell you to add a passenger to your existing policy, if you’re covered, that would be skewed. Keep in mind that you may need to increase coverage if the new garage has a much higher replacement cost, but that’s not the same as saying it’s not included in your existing policy.
Examples of twisting in health insurance
Health insurance coverage can be expensive. Even if you want to lower your premiums, if your health insurance doesn’t cover all of your conditions or medications, switching coverage can be disastrous.
If an agent were to sell you a policy and purposely not tell you that your new policy excluded one of your pre-existing conditions, that would be a twisting. Deliberately withholding information to close the sale is unethical and often illegal.
What is “Churning”?
In addition to the twist, churning is another unethical practice an agent can do to sell a policy. Churning is when they convince you to buy a new policy from the same company as your existing policy. Again, the new policy may not provide better benefits or have other benefits for sales to count as revenue. By selling it, they can simply earn an extra commission that is higher than a renewal.
What is “sliding”?
The third unethical part of insurance sales is called ‘slipping’. It’s a less obvious part of selling insurance because it’s not an entirely new policy. Instead, it takes the form of addendums and addendums.
The coupon allows an intermediary to sell an insured product or additional coverage that he or she does not need. An example would be to sell you a passenger for high-end jewelry while your primary coverage limits would pay for the replacement cost.
An insurance commissioner would also consider slipping if you didn’t approve the addendum or thought the passenger wouldn’t increase their premium.
Protecting Yourself Against Twisting In Insurance
How can you protect yourself from insurance twisting?
- Watch out for the hard sell first. If your agent is pushing a policy, or a policy change, hard and making you uncomfortable, they may not have the best reasons. Ask for more details.
- Second, get all the details. Good officers know that education is part of their job. They must be willing to explain the pros and cons of their policy choices. If you ask why you need higher coverage limits for your car, they should have a good answer ready.
- Third, ask for time to reflect on the policy change and review the disclosure statements. If the agent seems reluctant to provide the information in writing or allows you to consider your options, walk away.
What Is Twisting In Insurance – Signs To Look Out For
What else should you pay attention to when purchasing a new policy?
Typically, a major life event will require you to review your existing policies. You bought a new house or car, had a baby, or got a new job. If an agent recommends that you make a policy change when nothing in your life has changed, that’s a red flag.
Premiums are for buying protection, and a higher premium is usually (not always) associated with a higher level of coverage. If a replacement policy gives you better coverage or the same coverage for lower premiums, it’s probably a good deal. But when the premiums are shockingly low and the broker makes tons of promises, this can be tricky.
Does the comparison seem incomplete? When the agent compares your old policy and the policy you’re selling side by side and something is missing, that’s a red flag. Don’t see the franchise? And the maximum coverage? Is there something on one side of the equation but not on the other? Beware of incomplete or incompatible disclosures.
Finally, what commission will the broker receive if you buy the new policy? You have the right to ask. Good agents know that their commission reflects the time and effort they put into helping them find the best policy and that satisfied customers value their experience and are willing to pay. While some people just don’t feel comfortable talking about money, keep it in mind if they’re dodging the question or protecting your answer.
How To Get Protection Against Insurance Twisting?
Well, you already know what is twisting in insurance. First of all, pay attention to hard sales. If your agent is promoting a policy change and making you uncomfortable, they may not be acting in your best interest or asking for more details. Second, get as much information as possible. Good cops understand that education is part of their job. It would help if you were willing to discuss the pros and cons of your policy choices.
For example, you wanted to know why your agent is recommending wider coverage; in this case, he should be ready to give you an excellent answer. Third, take the time to review the policy change and disclosure statement. If the agent is reluctant to provide written information or time to review your options, move on.
What does the law say about the twisting in insurance policy?
The insurance industry is highly regulated, with laws and professional codes of conduct governing how agents can behave. If an agent is found to have broken a law or violated the code of conduct, he could lose his license.
In general, your insurance agent should act to protect your financial well-being. They cannot sell you a policy that conflicts with your interests. They should also provide you with comprehensive information to make the best choice.
Agents cannot lie, cheat, or misrepresent a policy, and they certainly cannot recommend one policy over another based on their commission. Giving questionable advice or violating your “duty of care” is an act of bad faith with serious consequences. Consequences alone provide a measure of protection.
What to do if you think you’ve been twisted?
The safeguards are there to help consumers who believe they have been scammed. Before taking any action, talk to an agent you trust and ask them to review your old and new policies. Most agents would like to earn your trust and maintain their reputation in the industry and will review their policies for signs of fraud.
You can report the insurance company to the Ministry of Insurance. They will investigate and may ask the company to resolve the issue. Agents found guilty can pay fines and lose their license.
The state insurance commissioner can file a complaint against them, but they do not represent individuals. Any lawsuit filed by the state insurance commissioner won’t compensate you, so if you need financial redress, talk to a lawyer about direct representation.
Pros And Cons Of What Is Twisting In Insurance
Pros:
Twisting has pros and cons – but the pros are all on the agent’s side.
When a new policy is sold, the broker receives a new commission.
The more expensive the policy she convinces you to buy, the better your opinion.
Cons:
You, on the other hand, have the disadvantages:
The policy may reduce coverage or impose restrictions that were not in the original.
If it’s a life insurance policy, much of the cash value you built up with your old policy may be lost when you make the replacement.
Conclusion – What Is Twisting In Insurance
You already know what is twisting in insurance. This act is unethical as agents are required to promote only what is best for the insured. Primarily, the purpose of insurance is to relieve customers of financial stress. That’s why it’s best to find the right insurance broker for you!
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