Twisting Insurance

Twisting Insurance: How It Works

Twisting insurance is a term that people don't frequently use, so fraud is very prevalent these days. Those who are not associated with the industry may wonder what twisting in insurance may include. First, let's take a look at life insurance long-term benefits, which may help you understand that twisting insurance may not always be a good idea.

A life insurance policy provides customers with long-term coverage. Either your family will get the money after your death, or it may result in a considerable amount of cash provided to the client after a certain period.

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If you buy a life policy when you are young, rates will be based on your age at that time, but as time passes and you become older, the cash value will grow.

In case you choose to replace your policy, you will have to pay a higher rate, but you cannot expect that the new policy increases in cash value as quickly as the first one did. But let's dive more into the twisting insurance act, a common trick that adds to the plethora of insurance scams out there.

When Changing Life Insurance Policy Is Not a Good Thing

Changing life insurance policy is not always a wise thing to do is proven because scammers tend to take advantage of this, making victims of twisting in insurance.

So, we will start our article by explaining this term. The insurance twisting definition that can be found on Wikipedia is:

“The disreputable practice of selling unnecessary insurance to a customer to earn a commission. Twisting benefits an insurance agent while damaging the customer. The agent benefits because the commission earned on the sale of a new health insurance policy is substantially higher than that earned on the renewal of an existing policy.”

According to this definition, if an agent performs the act of “twisting”, he/she is doing an illegal action. What he/she does is use the customer's personal information to change an existing life policy with a new one, presenting it as more affordable and beneficial to the customer. Simultaneously, it is only helpful to the agent himself/herself.

Detecting When Twisting In Insurance Really Happens

You need to have in mind that not every change is misleading, and not every case is actually a case of twisting in insurance.

In case you, as the customer, get better benefits from the new policy, that is the right of an insurance agent to inform you about it and offer it. Acceptance of this offer is not an illegal replacement. However, a life insurance agent must get you acquainted with both the positive and negative sides of changing policies. 

So, you must get acquainted with what an agent is giving you, make sure you are provided with all the necessary documentation, and understand which kind of consequences you may expect to replace the policy.

You are the victim of life insurance twisting if an agent fools you into replacing your life policy with another policy offered by the other life insurance company. 

The customer accepts to change it, putting himself/herself in a worse position. The main aim of twisting is to result in agents getting commissions.

Twisting vs. Churning

Many people tend to get confused with these two terms. Let's make a comparison and give you an insight on how to differentiate between them.

The main difference is in the life insurance company. If a customer accepts to change his/her old policy with the one offered by the same life insurance company, but the benefits are not on the side of the customer, the process is called “churning”.

On the other hand, twisting includes the procedure when the customer changes his/her old policy with the new one, which is from a different life insurance company.

Of course, both these practices are considered illegal if the customer was provided misleading information about this replacement's benefits.

Swapping Car Insurance Policy

The instances of twisting insurance are not only related to life insurance policies. Many clients would like to change their car insurance policies when purchasing a new car.

In case you're in a similar situation, think well before making a final decision on which insurer to sign the agreement.

The whole process of changing your insurance to a new car is not at all troublesome. You first need to know the type of car you plan to buy and ask for a new insurer quote. Once the quote is provided to you and you find it acceptable, you can visit the dealership and purchase the car. 

When you find yourself at the dealership, you should call the insurer to confirm that you have insurance with the new provider.

You must get this data via fax or email, as written confirmation is valuable. That is the moment when you can call the old insurer and cancel the old policy. The best moment to change your policy is the period before the renewal.

Upon paying your final payment to the old insurer, you can make payments with the new one. The old company is obliged to send you a notice informing you about the need for policy renewal 30 days before the policy is auto-renewed. 

During those 30 days, you can find a new company and inform the old one you want to change it.

How Can I Spot Insurance Twisting?

One of the reasons you should replace a policy is the change in your financial situation. If you have not experienced any kind of financial changes and your agent suggests a replacement, you should not trust him/her.

In this case, you can ask for a written comparison and go through all the details. Make sure you understand how high the premiums will be. Also, what kind of change in cash values will take place, the benefits, and the policy limitations.

Finding out that you are a victim of insurance twisting makes you obliged to report this fraud. You are supposed to report your agent to the state insurance commissioner. In case it proves you're right, the agent will need to pay civil fines and criminal penalties, plus lose his license.

Twisting In Insurance: Watch the Video

Watch the video below to see an explanation of the twisting insurance:

 

Insurance Twisting: How To Report

Warn your online friends about the insurance twisting by sharing this article on your social media platforms. You can  officially report suspicious insurance companies and agents to the FTC using the link below:

Report To The FTC Here

 

How To Prevent Yourself More

If you want to be the first to find out the most notorious scams on a weekly basis, please subscribe to the Scam Detector newsletter. You'll receive periodic emails – no spam. At the same time, educate yourself with some other insurance fraud-related articles below so that you can protect yourself. Last but not least, feel free to use the comments section below to expose other insurance scammers.

Here are some must-reads for the end:

Top 10 Life Insurance Scams

Top 7 Health Insurance Scams