Within the insurance coverage business, a selected unethical follow includes inducing a policyholder to cancel an present insurance coverage coverage and buy a brand new one, typically to the detriment of the policyholder. This motion usually happens when an agent misrepresents the phrases of the prevailing coverage or the brand new coverage, or each, to be able to safe a fee from the sale of the brand new coverage. For instance, an agent may persuade a consumer to interchange a complete life insurance coverage coverage with a time period life coverage by exaggerating the price of the entire life coverage and downplaying the long-term advantages it supplies.
This exercise is taken into account dangerous attributable to its potential for monetary loss to the policyholder. The policyholder might incur give up costs on the canceled coverage and should not understand the total worth of the brand new coverage. Moreover, the policyholder might lose advantages related to the unique coverage, resembling assured rates of interest or protection for pre-existing circumstances. Traditionally, laws have been put in place to stop this follow and shield customers from unscrupulous brokers. The main target is on guaranteeing that coverage replacements are really in the very best curiosity of the consumer, not solely for the agent’s monetary achieve.
