New Jersey Life Producer Law Practice Test

What is the term for using misrepresentations to induce an insured person to terminate an existing policy and purchase a new policy?

1. Churning

2. Twisting

3. Backdating

4. Switching

The correct answer is: Twisting

The term for using misrepresentations to induce an insured person to terminate an existing policy and purchase a new policy is known as twisting. This practice is considered unethical and, in many jurisdictions, illegal. Twisting often involves a representative misleading a client regarding the benefits of a new policy compared to their current one, suggesting that the new policy is superior when it may not be. Understanding twisting is critical as it highlights the ethical responsibilities of insurance producers. Producers are required to provide accurate information to clients, ensuring they make informed decisions regarding their insurance needs. It is also essential for protecting consumers from potentially harmful financial decisions that could arise from misleading practices. The implications of twisting can have serious repercussions, including legal consequences for the producer and financial losses for the client. Recognizing this term is essential for anyone studying life insurance practices and regulations, as it emphasizes the importance of integrity in the industry and the protection of consumer rights.