State RegulationsMI specificDifficulty 3/5
A producer in Kalamazoo urges a client to let an existing life policy lapse by exaggerating the old policy's disadvantages and overstating the new policy's benefits, so the client will replace it. In Michigan, this practice is best described as:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.C.L. 500.2005(f) makes it an unfair trade practice to misrepresent for the purpose of inducing a policyholder to lapse, forfeit, exchange, convert, or surrender insurance. The solicitation provisions (M.C.L. 500.1371 to M.C.L. 500.1383) require honest sales presentations, and disparaging the old policy while inflating the new one to force a replacement is precisely this prohibited practice, exposing the producer to DIFS enforcement.
Why the other options are wrong
- A) Conservation is the existing insurer's effort to keep its own coverage in force after learning of a replacement; it does not describe misrepresentation to force a swap.
- B) Rebating involves giving or offering value not specified in the contract as an inducement under M.C.L. 500.2024, which is not what occurred here.
- D) Twisting is an unfair trade practice under Chapter 20 of the Insurance Code of 1956, not a continuing-education matter under M.C.L. 500.1204c.
Memory hook
Twist = trash-talk plus tall tales to force a swap, barred by M.C.L. 500.2005(f).