Illinois Life Producer State-designated Practice Exam

What is the act of inducing an insured to surrender their existing insurance policy through misrepresentation called?

1. Rebating

2. Twisting

3. Churning

4. Fraud

The correct answer is: Twisting

The correct answer is centered on the concept of "twisting," which refers to the unethical practice of persuading a policyholder to replace or surrender their existing insurance policy by presenting misleading or false information. This tactic often occurs in the insurance industry when agents might exaggerate the benefits of a new policy while downplaying or misrepresenting the advantages of the current policy, ultimately leading to potential financial losses for the insured. Twisting is particularly concerning because it undermines the trust that individuals place in insurance representatives and can result in clients being misled about their coverage and rights. The practice is deemed illegal in many jurisdictions, including Illinois, to protect consumers from unscrupulous agents. The other terms, while related to insurance practices, do not accurately describe the specific act of inducing someone to surrender their policy through misrepresentation. Rebating involves providing a portion of the commission as an incentive, churning relates to excessively trading insurance policies for commissions, and fraud generally encompasses deceptive practices that are broader than just the misrepresentation associated with twisting.