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Twisting the Truth
The insurance agent you have been dealing with for years has
retired, and the replacement agent contacts you to discuss your life
insurance coverage. He or she recommends you replace several older
policies, which have accumulated significant cash value, with newer,
improved policies. He or she shows you impressive charts and
projections about how much better the new policies are than the old
ones—including lower premiums, a higher death benefit, and faster
cash-value accumulation. It sounds advantageous, and the agent seems
earnest, so you sign on the dotted line. But when your next annual
statement arrives, you notice the cash value for the new policies is
far less than the cash value on the old policies. You have just
become a victim of “twisting,” a deceptive insurance sales practice. By definition, twisting occurs when an agent, for the purposes of
generating a commission, persuades a client to lapse, surrender, or
otherwise terminate an insurance product and replace it with another
product that provides little or no economic benefit to the client.
Often, the accumulated cash value of an older policy is used to mask
the true cost of the new policy, allowing the agent to provide a
favorable (but misleading) comparison. In the insurance business,
“churning” often is used interchangeably with twisting, though
churning can refer more broadly to excessive trading or financial
product replacement for the purpose of generating commissions. If you think you’ve been a victim of an insurance scam, locate
your state insurance commission on the National Association of
Insurance Commissioners Web site,
www.naic.org. Click on one of the links in the U.S. map in the
right corner. — Former Army Capt. Phil Dyer, CFP, is deputy director, Benefits Information. For additional financial counseling, MOAA members can contact Garrett Planning Network (GPN) at (866) MOAA-GPN (662-2476) or online at www.garrettplanning.com. |
