Twisting in Insurance: Twisting, Churning and Replacement

What Is Twisting in Insurance?

Twisting in insurance is using misleading statements or incomplete comparisons to persuade someone to drop, surrender or change an existing policy and buy a new one, often from a different insurer. Florida's insurance code, for example, defines twisting as "knowingly making any misleading representations or incomplete or fraudulent comparisons or fraudulent material omissions" about policies or insurers to induce a person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert a policy, or to take out a policy with another insurer (Fla. Stat. 626.9541(1)(l), 2025).

The key word is misleading. Replacing a policy is not twisting by itself. A replacement that is fully disclosed and actually serves the client is a normal part of the business.

What Is Churning in Insurance, and How Is It Different?

Churning usually refers to using the values inside an existing policy to buy another policy, mainly to generate new premium or commission. Florida defines churning as using policy values in an existing life policy or annuity, such as cash, loan or dividend values, to purchase another policy or annuity "with that same insurer" to earn additional premiums, fees, commissions or other compensation, when one of four conditions applies (Fla. Stat. 626.9541(1)(aa)1.):

There is no objectively reasonable basis for believing the replacement will give the policyholder an actual and demonstrable benefit.
It is done in a fraudulent, deceptive or misleading way, or involves a deceptive omission.
The applicant is not told that existing policy values will be reduced, forfeited or used to buy the new policy.
The applicant is not told that the new policy will not be paid up or that more premiums will be due.

In Florida's usage, then, twisting is misleading someone into moving coverage, while churning is moving values into another policy with the same insurer without a real benefit or proper disclosure. Other states word these differently.

Do the NAIC Models Define Twisting and Churning?

Not directly. Both terms are industry and state-law usage rather than defined terms in the NAIC models we read:

NAIC Unfair Trade Practices Act (Model #880, Spring 2024). The model never uses the word "twisting" or "churning." The closest provision is Section 4A(6), which lists as a misrepresentation any statement, "including any intentional misquote of premium rate," made to induce "the purchase, lapse, forfeiture, exchange, conversion or surrender of any policy." Section 4A(1) separately covers misrepresenting a policy's benefits, advantages, conditions or terms.
NAIC Life Insurance and Annuities Replacement Model Regulation (Model #613). "Churning" does not appear. "Twisting" appears only as a placeholder: Section 8A says any failure to comply with the regulation is a violation of "[cite twisting section of state's unfair trade practices act]." In other words, the model expects each adopting state to point to its own twisting provision.

Illinois is an example of a state statute that covers the same conduct without using the label: 215 ILCS 5/149(2) bars any "misleading representation or comparison of companies or policies" made to induce a policyholder "to lapse, forfeit, change or surrender" insurance. NAIC models are models, so what applies to you is the version adopted in your state.

What Counts as a Life Insurance Replacement?

Model #613 Section 2J defines replacement as a transaction in which a new policy or contract is to be purchased and the existing one has been or will be lapsed, surrendered or otherwise terminated; converted to reduced paid-up or extended term coverage or otherwise reduced in value through nonforfeiture benefits; amended to reduce benefits or the term of coverage; reissued with a reduction in cash value; or used in a financed purchase. A financed purchase (Section 2D) uses funds withdrawn, surrendered or borrowed from an existing policy to pay premiums on the new one; under that section, for a new policy issued by the same insurer to the same owner, use of those values within 4 months before or 13 months after the new policy's effective date is treated in regulatory reviews as prima facie evidence of intent to finance.

Section 1B exempts some transactions, such as credit life and certain group coverage; check your state's adopted list before treating a sale as exempt.

What Do Replacement Rules Require From Agents and Carriers?

In states that adopted Model #613, the core duties look like this. Section numbers are from the model; your state's regulation may number and word them differently.

Duty	Who	Model #613 Section
Applicant and producer sign a statement on whether the applicant has existing policies or annuities	Producer	3A
If yes, present the replacement notice (Appendix A) no later than taking the application and read it aloud unless the applicant declines; both sign it, and the applicant keeps a copy	Producer	3B
List each policy being replaced or used for financing by insurer, insured or annuitant, and policy number if available, noting whether each is replaced or used for financing	Producer	3C
Leave sales material with the applicant; give printed copies of electronic material no later than policy delivery	Producer	3D
Submit the required forms and copies of sales material used to the insurer	Producer	3E
Supervise and monitor producers' replacement activity	Insurer	4A, 4B
Verify forms; notify the existing insurer within five business days of receiving an application indicating replacement	Replacing insurer	5A(1), 5A(2)
Give the policyholder a 30-day right to return the new policy for a refund, as described in the model	Replacing insurer	5A(4)
Keep sales material and signed statements at least five years after the policy terminates or expires	Insurer	4E

Appendix A, the replacement notice, asks whether the applicant is considering ending an existing policy or using its funds to pay new premiums. It also lists trade-offs to weigh, such as surrender charges, a new period of up to two years in which claims on most new policies can be denied based on inaccurate statements, and a new suicide limitation period. The form includes a space for the applicant to state why the existing policy is being replaced.

Section 8A lists conduct treated as a violation, including deceptive sales material, failing to ask pertinent replacement or financing questions, intentionally recording answers incorrectly, and advising a negative answer to avoid giving the notice. Under Section 8B, a pattern of clients replacing policies after saying they would not is prima facie evidence of the producer's knowledge and intent.

What Are the Penalties for Twisting and Churning?

Penalties come from each state's statute, not from the NAIC models. Model #613 Section 8D says violators may face license revocation or suspension, monetary fines and forfeiture of commissions, and that an insurer may be required to make restitution where the violations were material to the sale, as adopted in each state. The two state codes below are the only ones covered here; other states were not reviewed.

Type	State and Citation	What the Text Says
Administrative fine	Florida, Fla. Stat. 626.9521(3)(a), (3)(d) (2025)	Twisting or churning: an administrative fine of up to $12,500 per nonwillful violation or up to $187,500 per willful violation; a willful-violation fine requires that the churning or twisting involve fraudulent conduct. Aggregate caps of up to $125,000 (nonwillful) and up to $625,000 (willful) for violations arising out of the same action.
License action	Florida, Fla. Stat. 626.621(2), (6) (2025)	The department may deny, suspend, revoke or refuse to renew a license or appointment for violating any provision of the code or for unfair methods of competition or deceptive acts prohibited under part IX of chapter 626.
Criminal	Florida, Fla. Stat. 626.9521(3)(a); 775.082(4)(a) (2025)	Twisting or churning is a first-degree misdemeanor, punishable as provided in s. 775.082, which sets a definite term of imprisonment of up to 1 year.
Business offense	Illinois, 215 ILCS 5/149(2), (5)	Violating the section is a business offense with a penalty of not less than $200 and up to $10,000, recovered by the Attorney General or the county State's Attorney.

For a broader view of where final expense agents carry regulatory exposure, see our insurance compliance risks hub.

How Do You Prove a Replacement Helped the Client?

Florida's churning definition turns on whether there was "an objectively reasonable basis" for believing the replacement would give "an actual and demonstrable benefit." Whatever your state's wording, ask: could a reviewer later see why this replacement made sense for this client? A strong file usually contains:

The signed existing-coverage statement and replacement notice, with every affected policy listed (Model #613 Sections 3A to 3C, as adopted in your state).
A side-by-side comparison of the old and new policies: premium, death benefit, cash value given up, surrender charges, waiting or graded-benefit periods, and the new period in which claims can be contested.
The client's own reason, in their words, on the notice and in your notes (for example, premium they can no longer afford, or a benefit need the old policy does not meet).
Disclosure of what the client gives up, including reduced or forfeited values and any premiums still due.
Copies of all sales material and illustrations used, as Section 3D and 3E require.
The recorded call, where lawful. A recording can show the questions were asked and the notice was read. It supports the paperwork; it does not replace it.

Recording has its own consent rules, which vary by state; set your disclosure practice first using our guide to call recording consent for insurance agents, and ask counsel about retention.

Where Do Inbound Calls Fit?

A consumer who calls in may already own a policy. In states following Model #613, the producer duties generally apply whenever you take the application, including on an inbound call, so plan to ask the same existing-coverage questions and use the same notice, policy list and carrier forms; check with your carrier and counsel. The same documentation habits protect the client and you. Agents can read more about how CallX works on the agents page.

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Frequently Asked Questions

What Is the Difference Between Twisting and Churning?

In Florida's code, twisting covers misleading someone into lapsing, surrendering or converting a policy, or moving to another insurer. Churning covers using an existing policy's values to buy another policy with the same insurer to earn more compensation, without a reasonable basis for a real benefit or without required disclosures.

Is Replacing a Life Insurance Policy Illegal?

Generally no. It is allowed when your state's replacement rule is followed and the sale is not misleading. The rules focus on disclosure, the replacement notice and carrier notification.

What Is a Life Insurance Replacement Form?

Usually the replacement notice (Appendix A in Model #613) plus the signed existing-coverage statement. Use the form your state and carrier require.

This article is general education, not legal advice. It summarizes the NAIC Life Insurance and Annuities Replacement Model Regulation (Model #613), the NAIC Unfair Trade Practices Act (Model #880, Spring 2024), Florida Statutes 626.9521, 626.9541, 626.621 and 775.082 (2025 edition) and 215 ILCS 5/149, all read in November 2026. NAIC models apply only as adopted in each state, and state rules, carrier requirements and later amendments can differ. Confirm your practices with counsel, your carriers and your state insurance department.

Twisting in Insurance: What Twisting and Churning Mean, the Penalties, and How to Prove a Replacement Helped the Client