Twisting

Producer Calder writes an application for the term policy his client asked for, then quietly adds an accidental death rider the client never requested and never discussed, and quotes a single combined premium so the extra charge is not visible. Which unfair practice does this describe?

1. A.ChurningChurning is a producer generating new business by replacing his own clients existing policies. No replacement occurred here.
2. B.RebatingRebating gives the consumer something of value as an inducement to buy. Here the consumer is being charged more, not given something.
3. C.TwistingTwisting is inducing the replacement of an existing policy through misrepresentation. No existing policy is being replaced.
4. D.SlidingCorrect. Sliding is the addition of an unrequested coverage or fee whose charge is concealed from the consumer.

Why: This is SLIDING: adding a coverage, product or fee the consumer did not request and did not knowingly agree to, and collecting the charge for it. The essence of the offense is concealment of a charge for something unrequested, which is why Calder combined the premium into one figure. It is distinct from REBATING, which gives the consumer something of value, and from TWISTING and CHURNING, which involve inducing the replacement of existing coverage through misrepresentation. Note that offering the rider openly and having the client accept it would be perfectly proper.

Producer Dale Hutchings falsely tells Ruth Vasquez that her existing whole life policy "will be worthless in five years," and she surrenders it for a new contract with a fresh surrender-charge period and higher premium. The state defines twisting as:

1. A.A settlement optionSettlement options govern how proceeds reach a beneficiary after a death. The term in the stem describes producer conduct during the sales process instead.
2. B.A legitimate upgradeThe word legitimate is what breaks this. A properly disclosed replacement can genuinely serve a client, but the practice named here is defined by the misrepresentation used to bring it about.
3. C.A tax strategyNo tax planning is involved. This names a sales practice prohibited by regulation, not a technique for managing tax.
4. D.Inducing a policy replacement to the client's detriment via misrepresentationCorrect - twisting is prohibited.

Why: Twisting is inducing a policyholder to replace a policy to their detriment through misrepresentation - an unethical, illegal practice.

A producer persuades a client to drop an existing whole life policy and buy a new one by materially misstating the old policy's features. This practice is:

1. A.Permissible competitive sellingWrong. Competition never excuses material misrepresentation.
2. B.Twisting, a prohibited unfair trade practiceCorrect. Misrepresentation to induce replacement is the definition of twisting.
3. C.CoercionWrong. Coercion involves force or intimidation, not deceptive persuasion.
4. D.RebatingWrong. Rebating is returning part of the premium/commission as an inducement, not misrepresentation.

Why: Twisting is the use of misrepresentation to induce a policyholder to lapse or surrender existing insurance to buy a new policy, and it is a prohibited unfair trade practice. Citation: state Unfair Trade Practices Acts (NAIC model). Takeaway: misrepresentation + replacement inducement = twisting.

A representative repeatedly moves a client between similar mutual funds in different fund families with no benefit to the client, generating a new sales charge each time. This is...

1. A.rights of accumulationRights of accumulation reduce charges; they are unrelated to this abuse.
2. B.switching (also called twisting), a prohibited practiceCorrect — needless cross-family swaps to generate charges are switching.
3. C.a permissible letter-of-intent strategyA letter of intent is a breakpoint tool, not a justification for needless swaps.
4. D.rebalancingRebalancing adjusts allocations for a legitimate purpose.

Why: Needless cross-family movement to generate charges is switching (twisting), a prohibited practice.