What Is Insurance Twisting?

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Being injured or losing some of your precious possessions is challenging enough, and the last thing you want is the hassle of dealing with a difficult insurance claim. Across the U.S., insurance companies are obligated to sell policies and settle claims in good faith, which means they must act honestly and fairly in the interests of the policyholder. Sadly, some bad faith tactics still exist in the industry, and one of them is known as twisting.



Twisting occurs when an insurance company persuades a policyholder to surrender his policy and replace it with a new one to the detriment of the policyholder.

What Does Twisting Insurance Mean?

Twisting is the act of persuading a policyholder to surrender or lapse out a perfectly good policy in order to replace it with a worse policy from a different company. The sole aim is to generate extra profits for the insurance agent, who makes commissions by selling new policies to existing clients. Often the new policy is more expensive but has less coverage or more restrictions than the previous one. It rarely represents a good deal for the buyer.


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Churning is a similar type of trick, only this time the policy is replaced with one from the same insurance company. Both actions are scams on the policyholder and crimes in most states.

Understanding the Duty of Care

Insurance is a heavily regulated industry, and there are laws that regulate how an insurance agent can go about his business. Most states have codes of professional conduct that agents must honor in order to keep their licenses. These codes restrict how an insurance agent can sell or replace policies, and what the insurance agent can say or promise to the client in order to protect the financial well-being of the policyholder.


While rules vary from state to state, generally an insurance agent must give the client all the information she needs to make a decision in her best interest. An agent cannot mislead a client, misrepresent facts or make an unfavorable comparison between two insurance policies. They certainly cannot recommend a policy switch with the sole aim of getting a higher commission.


Anything that constitutes "questionable advice" – a category that includes twisting and churning – is an act of bad faith. For instance, an agent might encourage a policyholder to drop her health coverage for a policy that's cheaper but does not cover her preexisting medical conditions. The agent in this scenario has breached his duty of care and has potentially set the policyholder up for financial disaster down the road.


Twisting: The Law

The National Association of Insurance Commissioners has created model laws for the insurance industry that aim to put an end to unethical practices like twisting insurance policies. States are encouraged to adopt these laws for uniformity, and most states have. Generally, insurers must put the following protective measures in place to minimize the risk of twisting:


  • The creation of rigorous internal processes for handling policy switches, such as having a supervisor monitor and sign off on them.
  • Implementing a 60-day cooling-off period during which policyholders can change their minds, get the premium back and have the old policy restored.
  • Providing the provision of disclosure statements with specific information about the new and old policies, so the policyholder can compare the policies and make an informed decision on the replacement. The agent should notify the policyholder in writing that he or she is proposing a policy replacement, and it is against the law for him to make this recommendation on the back of incomplete or inaccurate information. The policyholder must sign the disclosure statement.


Often, it's the insurance agent's failure to make a full and fair disclosure of all of the relevant information that tips a policy replacement into the territory of twisting. If an insurance company follows the above protocols, then twisting should be virtually impossible.

How to Spot Twisting

Insurance agents are in the business of giving insurance advice to clients, and it's perfectly okay for an agent to recommend a different policy when the agent acts honestly and in the client's best interests. The problem is that twisting insurance policies is never in the policyholder's best interests – it exists to make money for the insurance company.


So, how do you know the difference between a beneficial policy switch and some bad faith twisting? Here are some things to look out for:

  • A recommendation to switch your policy when nothing in your life has changed. If your income, job, place of residence and family status is exactly the same as when you took the policy out, be cautious about replacing it.
  • Does the deal look too good to be true? Replacing your policy may be beneficial if you get better coverage, or the same coverage at a lower cost. However, you should be cautious about unbelievably low premiums or other lofty promises that could be the sign of an insurance scam.
  • Are you getting a complete comparison of the advantages and disadvantages of the two policies? In order to qualify as twisting, the recommendation to switch policies must be based on exaggerated or misleading advice. If you think you're not getting the full story, then the agent may be painting a phony picture to produce a sale.
  • What commission will the agent receive? You have the right to ask about the agent's commission for the sale of a new policy. If the agent is going to share commission with another broker or company, treat this as a red flag. Many states, including New York, make commission-sharing illegal in order to avoid twisting and churning scams.


If You’ve Been Twisted

If you suspect that you are the victim of a twisting scam, then you should report the insurance company to the state Department of Insurance. These agencies exist to investigate violations of state insurance laws and require corrective action on the part of the insurance company. If your agent is found guilty, he may have to pay fines and could lose his license as well. The state insurance commissioner can also press charges against the insurance agent if there is evidence of illegal practices.


Bear in mind that state insurance commissioners do not represent individual policyholders. Anti-twisting laws are designed to eradicate unethical behavior from the industry; they do not give compensation to consumers who have suffered as a result of fraudulent insurance practices.

The insurance commissioner cannot give you legal advice or represent you in a court of law. If you need legal advice about the possibility of suing to recover your losses, then you definitely should speak to a qualified legal expert in your state.