State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
A producer repeatedly persuades clients to surrender existing annuities and purchase new ones solely to generate commissions, causing clients to incur new surrender charges and restart surrender periods. This practice is known as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Churning — inducing unnecessary replacements to harvest commissions at the consumer's expense — is prohibited under California's replacement rules and unfair sales practices. Each replacement may trigger new surrender charges, extend surrender periods, and restart contestability, harming the consumer. Such conduct exposes the producer to penalties, fines, and license discipline under California Insurance Code provisions governing replacement and unfair practices.
Why the other options are wrong
- B) Replacing solely for commissions, without benefit to the consumer, is never legitimate portfolio rebalancing; replacements must be justified by the consumer's needs.
- C) Section 10509.912 exceptions cover direct-response sales and qualified-plan funding, not commission-driven churning.
- D) Structured settlement funding is a legitimate annuity use for litigation settlements, entirely unrelated to this abusive practice.
Memory hook
Churning = selling the same client the same promise again for a new check. Replacement rules make that a ticket to trouble.