What is Twisting in Insurance | Everything You Don’t Know Before

Act of convincing someone to cancel their life insurance and buy a new plan of the same kind. 

Misrepresentation occurs when an insurance salesperson persuades an existing life insurance policyholder to replace it with a comparable new policy sold by the agent. To be ca “misrepresentation,” the agent must use misleading or inaccurate information to convince the individual to switch.

Usually, it is not in the customer’s best interest to replace the policy. The agent must “misrepresent the truth” to convince the customer to purchase the new policy. This can happen with any insurance, but it is common and dangerous with life and health insurance coverage.

While it is common to replace existing coverage, encouraging people to modify their range based on deception or misleading information is unethical and illegal in most United States. Even in states where misrepresentation is illegal, this activity goes under general fraud laws.

What Defines Insurance Twisting?

What is Twisting in Insurance

Convincing you to change your homeowner’s insurance policy is not insurance fraud. After all, you have likely approached an agent to help you shop for a new policy. You may be refinancing or expanding your home and now is an excellent time to review your current insurance coverage.

For insurance misrepresentation to be a crime, the agent must have lied about the product to make a sale. Another part of selling a new method that can be difficult is if the agent is more interested in making more money than you are.

An insurance agent can’t sell you a policy if they make up information about your situation. This means that you won’t get the best policy for your situation. To be a “misrepresentation,” there must be some dishonesty on the agent’s part in laying the insured.

Examples of Twisting in Life Insurance

What is Twisting in Insurance

What is an example of sleight of hand by an insurance agent when it comes to your life insurance? Suppose you have purchased whole life insurance that has accumulated cash value.

You have asked an agent to help you find more affordable insurance that will still protect your family.

If you have a whole life policy, this will save you money on your premiums, but it won’t tell you that you’ll lose the cash value or pay taxes on it when you die. 

Twisting vs. Churning

Insurance regulations distinguish between life insurance policy switching and policy reconversion. Suppose a consumer is enticed to replace an existing policy with another policy from the same company. In that case, it is referred to as “churning” if the replacement is not beneficial to the customer. 

A different life insurance provider must issue a new policy to substitute. Whether it is “churned” or “twisted” life insurance, the technique is illegal if the consumer doesn’t know about the advantages of the substitution.

Why replace a life insurance or annuity contract?

Why replace a life insurance or annuity contract

Contract features such as riders and cash value accumulation have advanced considerably over the past decade. If you purchase an individual annuity contract and now desire one with a long-term care rider. On the other hand, if you can change a permanent life insurance contract for one with more favorable contract accumulation options, contract reconversion is a no-brainer.

Insurers facilitate this process in some cases, as many contracts allow policyholders to withdraw the value of their contract without penalty approximately ten years after contract execution. Even for customers who may face fines, insurers often offer upfront bonuses to compensate for the contract value lost due to early termination of the contract.

Of course, such bonuses often serve as an inducement to transfer. If a consumer has exceeded the 10-year rescission period, why not share contracts and collect a few thousand additional dollars in value?

Why not replace an insurance contract?

The first year of an insurance contract is the highest-paying year for a life insurance producer. Increased contracts equate to increased revenue.

On most life insurance policies, especially permanent life insurance or annuities, the commission is approximately 50% to 90% of the premium paid in the first year, of which the producer receives about 70%. Usually, 20% to 30% goes to the agency, wholesaler, or insurance marketing organization that negotiated the role between the agent and the company. 

The percentages presented here are typical averages; each contract is unique. The argument is that a producer may advocate a contract swap to convert an existing agreement into a new contract that will earn him a hefty commission. The motivation, in this case, is purely lucrative: securing the large commission upfront is a quick method of financing the business.

If a producer changes agencies, he needs to forfeit the trailing commission. Commercial motives are also at play here.

Often, these contracts are nothing more than paper names for producers. 

What Can and Cannot Be Considered Insurance Twisting

Now that you understand what misrepresentation is, let’s see two cases that aren’t misrepresentation:


To save money on term life insurance, an agent may try to persuade you to cancel your old policy and replace it with a new, cheaper one without notifying you of the potential loss of cash value or the additional taxes you’ll have to pay.

Don’t Twist

An insurance agent urges you to exchange your current policy for a more expensive but comprehensive approach.

Never blindly trust an insurance agent. Second thoughts are beneficial, especially since devious agents may have more tricks up their sleeves than simply misrepresenting insurance.

Frequently Asked Questions

What is insurance twisting?

An insurance sleight of hand occurs when an agent convinces a policyholder to cancel their current policy and obtain a new one that does not suit them. 

What Does the Law Say About Insurance Twisting?

The insurance industry has many regulations, with rules and professional codes that say how agents should act. If they find an agent to have broken the law or a code of conduct, it can happen.

How do Reputable Agencies Guard against Insurance Twisting?

To prevent misrepresentation of insurance policies, an agency’s internal evaluation process should be thorough when someone changes plans. All policy changes are subject to Insurance Pro AZ approval.

What to do if you think You’ve Been Twisted?

Before acting, consult with a reputable agent and request a review of your existing and new policies. Most agents are willing to earn your trust and defend the industry’s image, and they will thoroughly check your policies for fraud indicators.

What is Insurance Churning?

The agent is responsible for selecting the policy that offers the best value for buying coverage. Insurance churning occurs when an agent repeatedly changes a client’s insurance policy to earn a commission instead of providing better coverage.

Bottom line

In its simplest form, misrepresentation is the act of substituting one insurer’s insurance coverage for that of another based on misrepresentations (Company A’s coverage is covered for Company B’s coverage).

Misrepresentation is financially damaging to customers, but it is big business for the agent who engages in it. Insurance agents who misrepresent policies usually do so to earn a commission on the sale of life insurance. The more expensive the coverage they convince someone to buy, the more commission they earn.

Not only is this deceptive, but prematurely surrendering a life insurance policy can be a waste of time and money for the insured since keeping the procedure for an extended time can enhance its value. Replacing insurance may be appropriate in cases where the client’s family or financial situation has deteriorated significantly.

In states with anti-transaction laws, agents found guilty face various civil and criminal consequences, including losing their insurance license.


Adam Grabois is an expert in all aspects of Insurance and Property with 20 years of experience. He is a licensed broker of all lines including property, casualty, life, and health. As a licensed adjuster, he is well-versed in all aspects of insurance, and he owns All Needs Insurance agency in Florida.

He attended Tufts University where he earned his undergraduate degree, followed by a Master's degree from Columbia University.

Adam shares his breadth of experience by helping many businesses and individuals manage risk and protect themselves financially. He now shares this with the audience of the "Pro Insurance Info" website.

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