Minnesota Life Insurance License Practice Exam

The act of inducing a person to terminate an existing policy and purchase a new policy is known as?

1. Twisting

2. Churning

3. Misrepresentation

4. Fraud

The correct answer is: Twisting

The act of inducing a person to terminate an existing policy and purchase a new policy is known as twinning. Twisting involves convincing a policyholder to give up their current policy for a new one, often for the benefit of the agent or company rather than the policyholder. This often happens under misleading or false pretenses, where the agent may exaggerate the benefits of the new policy while downplaying or omitting the advantages of the existing one. By influencing a client to switch policies without appropriate justification or consideration of the client’s best interests, the activity of twisting can lead to financial loss for the client, which is why it's regulated and often prohibited in many jurisdictions to protect consumers. Options that suggest definitions related to deceptive practices in the insurance realm, like misrepresentation or fraud, don't specifically capture the scenario of policy termination and initiation depicted in the question. Churning refers more directly to the practice of repeating the cycle of switching policies merely to generate commissions rather than the action of terminating an existing policy.