TWISTING INSURANCE: Definition, Examples, and Policies

twisting Insurance

When shopping for insurance, you want to strike a balance between adequate coverage, a manageable deductible, and reasonable premiums. If you’re concerned about getting the best deal on your policy be it life term or health insurance, you should learn about insurance twisting and how to protect yourself from it.

What is Twisting Insurance?

Twisting occurs when an insurance agent persuades a life insurance policyholder to replace his or her existing life insurance policy with a new similar policy sold by the agent. To qualify as twisting, the agent must use misleading or false information to persuade the person to switch.

Typically, replacing the policy is not in the best interests of the client. The agent must “twist the truth” or persuade the client to purchase the new policy. This can occur with any type of insurance, but it is especially common and dangerous with life insurance and health insurance policies.

While it is common practice to replace existing coverage, persuading changes in coverage based on misrepresentation or misleading information is unethical and illegal in most of the United States. Even in states where twisting is not yet prohibited, this practice may be prosecuted under general fraud statutes.

How an Insurance Twisting Policy Works?

It is not insurance twisting to simply persuade you to replace your homeowner’s insurance policy with another. After all, you most likely went to an agent for assistance in shopping for a new policy. You could be refinancing or adding an addition, and now is a good time to review your current policy.

For the sale of a new policy to be considered insurance twisting, the agent must have used deception to sell the policy. The truth is “twisted,” and you end up purchasing a policy that isn’t a better replacement for your current policy. Another twist in the sale of a new policy is if a higher commission or profit motivates the agent rather than your best interests.

Whatever the motivation, if an agent sells you a policy while twisting the truth, you will not purchase the best policy for your needs. Twisting must include an element of deception, in which the agent misleads the policyholder.

Twisting Insurance Examples

Examples of Life Insurance Twisting

Here is an example of an agent insurance policy twisting with your life insurance policy.

Assume you purchased a whole life insurance policy with an accrued cash value.

Whole life insurance, also known as return of premium insurance, is more expensive than term life insurance. So the premiums may have risen beyond your means.

You’ve contacted an agent for assistance in selecting a less expensive policy that still protects your family.

The agent persuades you to cancel your whole life policy and replace it with a term life policy. This will save you money on premiums, but what they don’t tell you is that you’ll either forfeit your whole life policy’s cash value or pay taxes on it. Any premium savings could be wiped out by these taxes.

Reputable agents will explain the benefits and drawbacks of any policy changes you’re thinking about, including any tax implications. They will not withhold information in order to make a sale.

Examples of Homeowners Insurance Twisting

Homeowners’ insurance can be perplexing; for example, does your policy cover a detached garage or outbuilding? Is it necessary to increase your liability coverage for your new pool?

In homeowners insurance, an example of twisting would be if you built a new garage and then called your agent to see if it was covered. If they say it isn’t and tell you that you need to add a rider to your existing policy when it is, they’re twisting your arm. It’s worth noting that you may need to increase coverage if the new garage has a much higher replacement value. However, that doesn’t mean it’s not covered under your current policy.

Examples of Health Insurance Twisting

Health insurance can be quite costly. Even if you want to lower your premiums, switching coverage could be disastrous if your health insurance does not cover all of your conditions or medications.

It would be twisting if an agent sold you a policy and purposefully failed to inform you that your new policy excluded one of your pre-existing conditions. Purposefully concealing information in order to close the sale is unethical and, in many cases, illegal.

Read Also: How To Get Insurance To Pay For Roof Replacement

What is “Churning?”

Along with twisting, another unethical practice that an agent may engage in to sell a policy is churning. Churning occurs when they persuade you to purchase a new policy with the same company as your current policy. Again, the new policy must not provide better benefits or have other advantages in order for the sale to be considered churning. Selling it simply allows them to earn a larger commission than a renewal.

What is “Sliding?”

The third unethical aspect of insurance sales is referred to as “sliding”. It’s a less obvious part of the insurance sale because it doesn’t involve selling you a completely new policy. It takes the form of riders and addendums instead.

Sliding occurs when an agent sells a policyholder additional products or coverage that they do not require. Selling you a rider for high-value jewelry when your core coverage limits would cover its replacement cost is an example.

Sliding would also be considered by an insurance commissioner if you did not authorize the addendum or believed that the rider would not increase your premiums.

The Benefits and Drawbacks of Twisting Insurance

Twisting has advantages and disadvantages, but the advantages all favor the agent. The agent earns a new commission by selling a new policy. The more expensive the policy she persuades you to purchase, the better her deal. You, on the other hand, get the disadvantages. The policy may limit coverage or impose restrictions that were not included in the original. If it’s a life insurance policy, you might find that much of the cash value you’ve built up in your old policy vanishes when you take out the replacement.

Defending Yourself Against Insurance Twisting

How can you safeguard yourself against insurance swindling?

First, be wary of the hard sell. If your agent is pushing one policy or a policy change too hard and making you uncomfortable, they may not be acting in your best interests. Inquire for more information.

Second, gather all of the pertinent information. A good agent understands that education is an important part of their job. They should be willing to explain the benefits and drawbacks of your policy choices. If you ask why you need higher coverage limits for your car, they should be able to give you a good answer.

Third, request time to consider the policy change and to review the disclosure statements. Walk away if the agent appears hesitant to provide you with the information in writing or to give you time to consider your options.

Signs of Insurance Twisting

What else should you look for when shopping for a new insurance policy?

Typically, a major life event will necessitate a review of your existing policies. You got a new car or house, had a baby, or started a new job. It’s a red flag if an agent advises you to change your policy when nothing in your life has changed.

Premiums are used to purchase protection, and a higher premium often (but not always) correlates with a higher level of coverage. It’s probably a good deal if a replacement policy provides you with better coverage or the same coverage for lower premiums. However, if the premiums are shockingly low and the agent makes numerous promises, it is possible that the agent is twisting the truth.

Is the comparison lacking in any way? When the agent compares your old policy and the policy they’re selling you side by side and notices that something is missing, it’s a red flag. Do you fail to notice the deductible? What about the coverage quotas? Is something displayed on one side of the equation but not on the other? Be wary of disclosures that are incomplete or mismatched.

Finally, what commission will the agent receive if you purchase the new policy? You have the right to inquire. Good agents understand that their commission reflects the time and effort they put into assisting you in finding the best policy and that satisfied clients value and are willing to pay for their expertise. While some people simply do not feel comfortable discussing money. Take note if they duck the question or hedge their response.

What Is the Law on Insurance Twisting?

The insurance industry is highly regulated, with laws and codes of professional conduct dictating how agents should act. If an agent is found to have broken a law or violated the code of conduct, their license may be revoked.

In general, your insurance agent must act to safeguard your financial well-being. They are not allowed to sell you a policy that is not in your best interests. They must also provide you with comprehensive information so that you can make the best decision.

Agents are not permitted to lie, mislead, or misrepresent a policy, and they are not permitted to recommend one policy over another based on their commission. Giving bad advice or failing to fulfill their “duty of care” is an act of bad faith with serious consequences. The consequences alone provide you with some protection.

How do Reputable Agencies Protect Against Insurance Twisting?

The National Association of Insurance Commissioners developed model legislation that states were encouraged to adopt. Even if your state does not require them, ethical organizations have implemented them.

When someone switches policies, an agency must have a robust internal review process in place to protect against insurance twisting. A supervisor may be required to monitor and approve a policy switch. All policy changes are reviewed at InsuranceProAZ.

Another safeguard is a 60-day cooling-off period. Policyholders can change their minds and receive their premiums back within 60 days of purchasing a new policy. The agency will also reinstate the previous policy. This disincentivizes a hard sell in which the policyholder may walk away, take some time to think and realize they did not make the best decision.

Ethical organizations also provide disclosure statements that include detailed information about your old and new policies. This assists you in making comparisons. You will be asked to sign a disclosure statement acknowledging receipt of them.

What Should You Do If You Believe You’ve Been Twisted?

There are safeguards in place to assist consumers who believe they have been duped. Before taking any action, consult with a reputable insurance agent and request a comparison of your old and new policies. Most agents are eager to earn your trust and uphold the industry’s reputation, so they will scrutinize your policies for signs of fraud.

You can report the insurance company to the state’s Department of Insurance. They will conduct an investigation and may require the company to correct the problem. Agents who are found guilty may face fines and the loss of their licenses.

They can be charged by the state’s insurance commissioner, but they do not represent individuals. Any lawsuit filed by the state insurance commissioner will not compensate you, so if you want to seek financial redress, consult with a lawyer about direct representation.

Churning vs. Twisting Insurance

Insurance laws distinguish between churning and twisting of life insurance policies. If a customer is persuaded to replace an existing policy with one from the same company, the result is “churning” if the replacement was not beneficial to the customer. The new policy is from a different life insurance company, so it is twisting. Whether a life policy is replaced through churning or twisting, the practice is illegal if the customer was misled about the replacement’s benefits.


The majority of agents genuinely want to assist their clients. They’ve seen firsthand how important insurance can be in someone’s life, whether it’s to protect a business or to repair a roof after a windstorm. When you combine this with laws and regulations, you probably don’t have much to worry about when it comes to insurance twisting.

However, you can further protect yourself from fraud by working with a highly rated agency that has won numerous awards and has been in business for more than 15 years. All of this speaks to their dependability and satisfied customers.

Twisting Insurance FAQ’s

Is twisting in insurance illegal?

Most states make it illegal to “twist” while selling life insurance. Twisting occurs when an insurance agent uses deceptive tactics to substitute an existing life policy with a new one.

What is the penalty for twisting in insurance?

If the claim involves health care benefits fraud that exceeds $950, the offense is classified as a “wobbler,” which can be prosecuted as either a felony or a misdemeanor. As a felony, the penalty is two, three, or five years in prison, a $50,000 fine, or double the amount of the fraud.

What does misrepresentation mean in insurance?

Misrepresentation — a false or misleading statement that, if intentional and material, can allow the insurer to void the insurance contract.

What is the difference between churning and twisting?

In the insurance industry, churning occurs when a producer replaces a client’s coverage with one from the same carrier that offers comparable or worse benefits. Twisting is a substitute contract from a different carrier that offers equal or worse advantages.

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