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Difficulty: MediumUnfair Trade Practices

During a financial consultation, a producer discovers that a prospective client holds an existing variable annuity with a competing insurance company. Eager to earn a new commission, the producer provides a highly distorted side-by-side comparison. The producer aggressively highlights the maintenance fees of the existing contract while intentionally concealing the high surrender charges and extended accumulation period of the proposed replacement. As a result of this deceptive comparison, the client agrees to switch contracts. Which unfair trade practice has the producer committed?

  1. TwistingAnswer
  2. B
    Rebating
  3. C
    Defamation
  4. D
    Churning

Answer

Twisting
The correct answer accurately identifies the practice of making an incomplete or fraudulent comparison of insurance policies for the purpose of inducing a client to replace an existing policy. This specific deceptive act is universally defined in state insurance statutes as twisting.

Step-by-Step Solution

1
Analyze the producer's actions described in the scenario.
The producer provided a distorted and incomplete comparison of two variable annuities.
Identifying the specific behavior is the first step in classifying the regulatory violation.
2
Determine the outcome of the producer's actions.
The deceptive comparison induced the client to replace an existing contract with a competitor's contract.
The outcome (replacement of an existing policy) combined with the method (misrepresentation) defines the exact statutory violation.
3
Match the behavior and outcome to the correct legal definition.
Misrepresenting policy terms to induce a replacement is legally defined as twisting.
State regulations clearly separate twisting (deceptive replacement) from other practices like rebating or defamation.

Key Concept

Twisting as an Unfair Trade Practice
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Topics

Unfair Trade Practices

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