New Jersey Life Producer Law Practice Test

What term describes the unethical practice of encouraging a policyholder to switch policies under false pretenses?

1. Misrepresentation

2. Twisting

3. Fraud

4. Coercion

The correct answer is: Twisting

The term that accurately describes the unethical practice of encouraging a policyholder to switch policies under false pretenses is "twisting." This practice involves misleading a policyholder to believe that the new policy will provide better benefits or coverage than the existing one, often without disclosing important information about the new policy. Twisting is considered deceptive and is punishable under insurance regulations, as it undermines the trust between the insurer and the insured. In the context of the insurance industry, this practice can lead to adverse outcomes for policyholders who might find themselves worse off financially or in terms of coverage. It also harms the integrity of the insurance market, as it emphasizes profit over the genuine needs and interests of consumers. Recognizing twisting is important for both consumers and professionals in the insurance field, as it helps maintain ethical standards and protects consumers from being misled.