So, what is twisting in insurance? When an agent convinces a client to forsake its current policy to support a new policy that doesn't necessarily serve its own best interests, it's called insurance twisting. When the agent sold the client the policy to get the insurance twist sale, the agent had to be very displeased. The buyer may feel like the agent is trying to pull a fast one on him, and they don't understand why they are being sent a bill for something they didn't ask for.
Insurance twists come in many different forms. They range from getting more benefits for less money in life insurance to giving the insured party less money for a policy. One of the most common forms of insurance twisting is when an insurer offers an insured a better rate than someone with the same age, health, and claim history. Some insurers will make promises to reimburse an insured for part or all of the original face value of the policy but only pay out the difference if the insured sells the policy within a specific period, such as within two years of the purchase date. These policies are usually known as "conversion loans" and become increasingly common in life insurance and other insurance markets.
Another type of insurance twisting is when an agent tries to convince the policyholder to take out a high deductible policy to keep the client paying as little as possible. If the policyholder takes out a low deductible policy with the hope of saving money in the long run, the insured may decide to quit the policy before it expires. At that point, the agent can sell the policy to another customer at a discounted rate. Once again, the insured is usually displeased because they have been tricked. If the insured is a woman, she may not realize that the agent is trying to shift the balance of the settlement to her. Such tactics are unethical, but unfortunately, common.
Insurance policies "tied up" in terms of payment terms with agents are sometimes referred to as "revolvings." In these cases, an insured changes policies with an agent without first obtaining the policyholder's approval. Such a move is known as "revolving." To discourage "revolvings," most agents have strict rules about who can change policies and get approval. As a result, a "revolving" agent will often refuse to take any more paid policies until they receive written approval from the insured.
What is even worse than what is termed as "tying up" in insurance is what is commonly called "farming" or "ducking" an insurance policy. The practice of farming or ducking insurance involves using an insurance agent to sell off large numbers of policies to various competing agents. This can often be the most unprofitable business practice available in the insurance business. Because the insured is often forced into accepting the first policy offer that comes along, these agents receive a hefty commission for each policy sold. This is the primary reason most insurance companies have policies against "farming" or "ducking." If you think that you need life insurance and feel that an agent has advised you to accept a policy offered by a competing agent, it's essential to check out the Better Business Bureau (BBB).
A new variation on what is known as "revolving" is commonly referred to as "re-bating." When you hear about someone earning high commissions by doing nothing, you might wonder what that person is doing to earn high commissions. Simple enough - the person is earning high commissions by doing something. While the internet is filled with stories of people making outrageous claims of earning thousands of dollars a week through re-bating, there are also plenty of examples of real people earning substantial incomes from what is called "revolving" or "swinging" an insurance policy.
A typical example of what is twisting in insurance is what is known as "re-basing." A policyholder who has an insurance policy with a particular provider will sometimes seek another provider to secure a better rate, only to find that their old agent still accepts policies from other companies. The new agent then promptly suggests that the client switch policies to earn a better commission. So, while the insured may wind up paying more for coverage because of this "twisting" in the system, they will at least have another agent to talk to if they run into a snag in the future.
Another version of what is twisting in insurance is what is called "re-basing." Once again, one company will "buy" a policy from another, thereby locking the customer into an agreement for a more extended period. This practice is also why so many folks bailout of insurance when they get into financial trouble - they never even finish signing the new policy contract! Because the company keeps them locked in, the result is that the end-user of the coverage is hit with hefty fines and fees, while no one loses any money at all. What is happening is that the insured is paying twice for what is just the same product.
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