There are many ways that you can get in trouble with the twisting in the insurance field. One of the most common is being accused of twisting in your coverage. The definition of twisting in insurance refers to when an insurance agent gives one type of coverage to one person while also selling a different kind of coverage to another person that wasn't fully disclosed to the first client. This is considered a deceptive service because the first party wasn't adequately informed of the different options when purchasing insurance from that agent. As a result, the twisting in the insurance industry can lead to fines and even loss of one's license to sell insurance.
The term for insurance twisting used by brokers, underwriters, and agents is "firing the bell." This is a phrase that describes an illegal act in the business. The definition states that if this occurs, it is a violation of anti-trust laws. In other words, an agent or broker who will purposely or negligently give a different line of coverage to a client is guilty of twisting in insurance. Not only does this type of deception allow one agent or broker to win business over another, but it can often lead to significant legal problems. The Federal Trade Commission is looking into whether some agents practice insurance twisting as part of their jobs.
Another form of twisting in insurance happens when a broker or agent sells you an existing policy with a new term that is identical to that of your old policy. This is known as "churning." Churning in insurance refers to selling a client a policy with terms that are cash-flowing immediately. This can be incredibly tempting for agents and brokers who receive commissions based on how many clients sign up under them, but that should never be the goal. Instead, a good insurance company will always offer clients a new policy with better benefits at a better rate. This is called "net replacement" and can reduce financial risk and ensure that you don't have to pay for churning insurance policies.
One of the biggest threats of twisting in insurance is when agents and brokers convince customers to sign up with them by telling them that they need to purchase a new one. This tactic is most popular with people who have a large amount of risk associated with them. For example, if you have a high amount of health expenses, your premiums will be higher. However, if you sell your coverage to a person who doesn't have such a large medical bill, their rates can decrease significantly because of net replacement. Many customers won't think twice about buying a new policy from the same agent or broker who sold them their old one because they were convinced they needed it.
An even more significant threat of twisting in insurance occurs when an insured loses their home or other property to an insured party. In this scenario, agents may try to convince the homeowner to purchase more insurance than is required. To make this easier to understand, imagine a scenario where someone was injured in a car accident. The person's medical bills could exceed their net worth, making it impossible to pay for the damages and receive a fair settlement.
Sometimes, agents may attempt to get a policyholder to increase the deductible on their policy. Although this may seem like an attractive option, it can also be quite risky. If the insured ever gets injured while on their property, they might not have enough money available to settle the case. The new policyholder might then sue to recover the difference between the deductible and the property's value. Although this would seem like a losing proposition, agents may try to persuade the policyholder to increase the deductible because it gives them a way to receive compensation in the event of a lawsuit without actually purchasing additional coverage.
The final example of twisting in insurance occurs when a company tries to sell a homeowner a policy that provides too much coverage. Perhaps there are several items on the list that are expensive or that the policyholder does not need. In these situations, the company will often misrepresent the items on the list as necessary expenses. Sometimes, there might be no problem with the items on the list, but a homeowner might still get a bill for an unnecessary thing. When the bill comes for this item, the insurance policyholder might receive a fine because the state laws require insurance companies to provide proof of necessity.
In other words, if an item is not needed, it is not necessary to pay for it.
The most important tip to remember when considering any aspect of insurance twisting is that it happens all the time. Because of the internet, consumers can now contact an array of different companies. Many companies allow customers to create a review of a particular provider before making a decision. This means that a homeowner can visit a competitor's website and find out exactly how much coverage they receive and if any other consumers have received billing from the same provider. Therefore, when shopping for insurance, always take the time to contact your agent and review your policy.
0 Comments