An agent induces a client to surrender an existing, suitable life policy by making misleading and incomplete comparisons between the current policy and a new policy, solely to earn a new commission. Under California replacement rules, this practice is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Twisting is the prohibited practice of knowingly making misleading, incomplete, or fraudulent representations or comparisons of policies or insurers to induce an insured to lapse, surrender, or replace an existing policy. The general replacement regulation (CIC §10509-10509.09) governs replacement transactions and requires full disclosure and notice to the existing insurer precisely to prevent induced replacement. Rebating is returning part of a premium or commission to induce a purchase; churning is repeatedly replacing policies to generate commissions; defamation is making false statements about another insurer. Only twisting matches the misleading-comparison conduct described.
Why the other options are wrong
- B) Rebating is giving the applicant a portion of the premium, commission, or other value as an inducement to buy. The conduct described is misrepresentation of policy comparisons, not a financial inducement.
- C) Churning is the excessive and repeated replacement of policies to generate commissions for the agent. Twisting, by contrast, is the misleading comparison itself that induces a replacement transaction.
- D) Defamation is a false statement about another insurer or its products made to harm its reputation. Twisting involves misleading comparisons about policies, which may include but is not limited to defamatory remarks.
Memory hook
Twist the facts, twist the client's policy away — and twisting is forbidden in California.