What Is Twisting in Insurance? Unethical Insurance Sales Practices and How to Guard Against Them
Updated · Oct 17, 2022
Unethical sales practices are a common occurrence in the insurance industry.
Twisting, sliding, rebating, churning, coercion—the threats are many. And sometimes it’s hard to understand if we’re being scammed.
We put together this guide to help you protect yourself.
We start by discussing what twisting in insurance is, then cover other unethical practices.
Finally, we show you how to recognize and guard against insidious sales.
What Is Twisting in Insurance?
The definition of twisting insurance is tricking someone into dropping their current policy and buying a new one from another provider.
The switch usually isn't in the customer's best interests. Instead, the agent misleads the buyer in order to make more profit.
That said, not every sale of a new policy is considered twisting.
Only if the agent deceits the client in the process.
Another sign of twisting is if the agent’s motivation to get a bigger commission collides with the policyholder’s interest.
Other Unethical Insurance Sales Practices
In addition to twisting insurance, there are other unethical or illegal practices agents might use to make a sale.
What Is Rebating in Insurance?
Rebating refers to the act of giving incentives to customers to purchase a certain insurance plan. These can take the form of cash, gifts, or even a portion of the agent's commission.
This is illegal in most states. Still, some agents may try to disguise rebates as processing fees or service charges.
As a result, it can be difficult to know whether you are being deceived. So, ask questions and read the fine print before purchasing an insurance policy.
That way, you can ensure that you are getting the best possible deal on your coverage.
What Is Churning in Insurance?
Churning is when an agent convinces an existing customer to cancel their current policy and purchase a new one from the same company.
Usually, the motivation is to get a bigger commission. But the aim can also be to move a customer to a plan that is more profitable for the insurance company.
Either way, churning in insurance is unethical. Typically, it results in the customer paying more than they would if they had kept their original policy or renewed it.
Plus, churning can also lead to lapses in coverage. This puts the policyholder at risk if they experience an accident or illness.
What Is Sliding in Insurance?
Sliding is when an agent tries to sell you additional coverage or riders you don't need.
For example, they might tell you that you have to get an umbrella policy when you buy homeowner's insurance.
This would increase your premiums without adding much value.
Sliding insurance riders or addendums isn’t illegal.
It is, however, unethical, especially if you didn't agree to add the rider or thought it wouldn't increase your premiums.
What Is Coercion in Insurance?
The definition of insurance coercion is pressuring or forcing someone to buy or switch their insurance policy.
Coercion can take many forms—for example, threatening a customer’s reputation if they do not purchase additional coverage or a new policy.
Protecting Yourself From Twisting
The agents’ role is to convince people to buy insurance and consult them when they want to switch or renew their policy.
But they shouldn’t do so against the client’s will or best interest. Practices that involve misleading are unethical and even illegal in some cases.
Here’s how to recognize and guard against malicious practices.
Signs of Twisting Insurance
There are a few signs that an insurance sale may be unethical or considered twisting.
If the agent is pushing hard to sell you a particular insurance plan, you should take the recommendation with caution.
Request more information about the policy and how it compares to your current plan. If the provider withholds information, that’s a clear sign something is amiss.
Another red flag is if there is no change in your life that requires getting a new policy.
Switching your insurance plan may be justified if you have a new member in your family or buy a new property, for example.
Otherwise, it probably isn’t necessary.
Finally, ask yourself whether the new plan offers better conditions than the old one.
If you’ll get more coverage or pay lower premiums for the same benefits, it might be worth it. Otherwise, it’s probably a case of insurance twisting.
State and Company-Level Measures Against Twisting
Insurance companies have a number of measures in place to prevent agents from twisting policies.
For starters, twisting, rebating, and coercion are illegal in many states.
What’s more, most insurance companies have strict rules and procedures in place.
For instance, agents may have to get approval from a superior before making any changes to a client’s plan.
Other providers perform regular reviews of the sales practices.
In addition, many companies offer a 60-day cooling-off period. This gives customers time to reconsider.
If they cancel the new policy, they get a refund of the paid premiums.
There are plenty of unethical practices in the insurance sales industry.
In this article, we focused on what twisting in insurance is and how to guard against it.
If you are thinking about switching insurance plans or providers, make sure you understand the terms of the new policy.
Check whether it is truly in your best interest before making a decision.
With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.