Twisting in insurance happens when an insured individual or their family pays more for insurance coverage than the actual worth of the claim they made. There are many ways to avoid this. One way to lessen this is to perform a claim survey and determine which areas might be prone to twisting. The leading causes for twisting are: a change in the way claims are paid, changes in which industries apply for coverage, and changes in government regulations. In addition, some industries could experience a decrease in claims, thereby reducing the risk of twisting insurance.
If you own an old car and buy a new car with your old insurance policy, if you use your new car without paying off the balance on your old policy, your insurer will likely consider you to have twisted in insurance. Therefore, before you purchase a new car, you must get rid of your old policy. In most states, this is called "cashing out," and it must be completed to take advantage of a new car. This also applies if you have an uninsurable lump sum, such as a life settlement, that you want to cash out.
For example, say you want to cash out a life settlement, but the life settlement is provided through an employer's policy. An agent from your employer must sell the procedure to you. If the employer previously sold the coverage, an agent from your new policy could be used to sell the policy to you. If, on the other hand, the policyholder sold the procedure through a broker, an independent agent who does not represent your employer can be used to cash out the policy.
There are several ways that agents can commit insurance twisting. For example, they may claim they saw something you wrote or something your agent said. If this happens, you must provide written proof. This proof can be in the form of a letter from a third party, a recording of a phone conversation, or a recording of a conversation where you are clearly stating what you said.
Another way agents can commit insurance twisting is through claims they make to a new company for coverage they already have. For example, if you had a traffic ticket from an accident five years ago and you applied for car insurance the following year, you may have been told the company only deals with companies with clean records. So, you would sign the application. Then, years later, you are in an accident, and the claim you made is denied. You then ask the agent why your claim was denied.
If you are thinking about purchasing auto or homeowner insurance online, read the policy carefully before signing. Make sure there aren't any obvious signs of fraud. Also, verify that there isn't another insurance provider who will be more expensive or provide better coverage. An example of an existing insurer who could be twisting your coverage is if they buy your policy from your current carrier and then sell it to you at a higher premium.
Asking your insurance agent a specific question, such as "Can I make a bigger payment and get a longer deductible?" can give you an idea of whether or not they are twisting the truth. Also, if you feel like your agent may be trying to steer you away from choosing a higher deductible, ask them if they can find a lower deductible. Many agents may try to convince you to select a lower deductible, but this may not mean your policy will be less costly overall.
If you feel like your insurance agent is practicing insurance twisting, you should take your complaint to the Arizona Department of Insurance. The Consumer Services Division receives many complaints about such actions by agents, so you don't have to worry about taking this step alone. You can find information on how to file a complaint on their website. However, you must speak with an attorney before doing so, as sometimes these claims are resolved without going to court.
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