If an agent advises replacing a policy solely to receive commissions, this act is known as what?

The act of replacing a policy solely for the purpose of receiving commissions is known as churning. Churning involves an agent persuading clients to replace their existing life insurance policies with new ones, thereby generating commissions for the agent from both the new policy and the cancellation of the old policy. This practice is unethical, as it may not provide any real benefit to the policyholder, and often the new policy may even have higher costs or less favorable terms than the original.

Churning is different from twisting, which typically refers to the practice of intentionally misrepresenting the terms of a policy or its benefits to convince a client to switch policies. Rebating involves providing a portion of the agent’s commission back to the policyholder, which can also be considered unethical in many states. Fraud generally encompasses any intentional deception or misleading action with the goal of securing an unauthorized benefit or unlawful gain, but it does not specifically address the situation of replacing a policy for commissions in the way churning does.