Texas Life Agent Practice Exam

Which of the following could be a consequence of "twisting" in insurance?

1. Increased policyholder satisfaction

2. Legal penalties for the insurer

3. A stronger customer relationship

4. Higher renewal rates

The correct answer is: Legal penalties for the insurer

Twisting refers to the unethical practice of persuading a policyholder to cancel an existing insurance policy in favor of a new one, often through misleading information. One significant consequence of twisting is that it can lead to legal penalties for the insurer. Regulatory bodies enforce strict laws to protect consumers from such deceptive practices, and if insurers are found engaging in twisting, they may face fines, sanctions, or other legal repercussions. This serves as an incentive for insurers to maintain ethical practices and avoid misleading clients about their policies. In contrast, the other choices do not represent the consequences of twisting. Increased policyholder satisfaction and stronger customer relationships are outcomes stemming from ethical practices and transparency, not from unethical behaviors like twisting. Additionally, higher renewal rates typically indicate customer loyalty and satisfaction with a policy, rather than being associated with twisting behavior, which ultimately damages trust between the insurer and the policyholder.