Washington Life Producer Practice Exam

What term describes the act of using misrepresentation to induce an insured to terminate an existing policy?

1. Churning

2. Twisting

3. Fraud

4. Switching

The correct answer is: Twisting

The term that describes the act of using misrepresentation to induce an insured to terminate an existing policy is known as "twisting." This unethical practice occurs when an agent or broker provides false or misleading information about a policy or a potential new policy, in an effort to convince the insured to surrender their current policy in favor of a new one. This can lead to negative consequences for the insured, including unnecessary financial loss or loss of valuable benefits associated with the original policy. Twisting is viewed as a serious violation of ethical standards in the insurance industry and can result in legal repercussions for the agent involved. This term is specifically recognized and defined within insurance regulations, highlighting the importance of honesty and transparency in the insurance sales process. In contrast, other terms like churning involve the practice of replacing a policy with another one from the same company primarily for the purpose of earning commissions, while fraud encompasses more general deceptive practices. Switching typically refers to changing policies among different companies without the misleading elements that characterize twisting. Understanding these definitions clarifies why "twisting" is the correct answer in this context.