What is the practice of misrepresenting a policy to induce a policyholder to switch policies called?

The practice of misrepresenting a policy to induce a policyholder to switch policies is known as twisting. This deceptive activity involves a broker or agent presenting misleading information about a new policy, often emphasizing the benefits while downplaying or obscuring the disadvantages or potential risks associated with the existing policy. The goal is to convince the policyholder that they will benefit by switching to a different insurer’s product, even if this move may not truly be advantageous for them.

Understanding the implications of twisting is important because it can lead to financial harm for consumers and is considered unethical and illegal in many jurisdictions, including Kentucky. This term is well-established in insurance regulation, as it protects policyholders from fraudulent practices that could compromise their financial security.

Churning refers to a separate but related practice where an agent encourages a policyholder to cancel an existing policy and purchase a new one purely to generate commissions for the agent, rather than to benefit the policyholder. Retaliation and defamation do not pertain to misrepresentation of insurance policies; they generally relate to employer-employee conflicts or false statements damaging someone’s reputation, respectively.