State RegulationsNC specificDifficulty 3/5
To persuade a policyholder to let an existing hospital policy lapse and take a new one, a North Carolina producer makes an incomplete comparison of the two policies' benefits. Which unfair practice has occurred, and under which authority is it prohibited?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under G.S. 58-3-115 (with the parallel producer provision at G.S. 58-33-75), no insurer or licensee may make any written or oral statement that willfully misrepresents or makes an incomplete comparison of policy terms to induce a policyholder to lapse, forfeit, surrender, exchange, or convert a policy — the practice known as twisting. Penalties run through the general civil penalty provision at G.S. 58-2-70 and license action under G.S. 58-33-46.
Why the other options are wrong
- A) Rebating involves giving or accepting an inducement such as a premium rebate not specified in the policy; no inducement is described here.
- B) G.S. 58-63-20 targets false information and false advertising generally, not the incomplete-comparison lapse inducement that defines twisting.
- C) The producer is acting in a licensed capacity; the wrong is the misleading comparison, not unlicensed activity.
Memory hook
Shady switch talk is twisting — incomplete comparisons induce the lapse.