State RegulationsTX specificDifficulty 2/5
A Texas agent falsely tells a policyholder that her existing life policy is being discontinued by the insurer, hoping she will let it lapse and buy a new policy from him. Under TIC 541.051, how is this conduct classified?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
TIC 541.051 lists as a misrepresentation making a misrepresentation for the purpose of inducing, or tending to induce, a policyholder to lapse, forfeit, or surrender an insurance policy. That is the statutory form of twisting: the wrong is not competing for the business, it is the false statement used to make the policyholder give up an existing policy. Replacement business sold this way exposes the agent to discipline for a prohibited trade practice even if the new policy is otherwise suitable.
Why the other options are wrong
- B) Competing for a policyholder's business is lawful; a knowingly false statement used to make her drop an existing policy is not.
- C) Rebating is giving something of value as an inducement to buy; a false statement about an existing policy is not rebating.
- D) Defamation under TIC 541.053 requires a false, maliciously critical or derogatory statement about an insurer's financial condition; this statement was about the policy.
Memory hook
Lying to make someone drop their policy is twisting, not competition.