Twisting

  • We have all heard some talk about twisting, and it has strong negative connotations.
    • Universal Life, mainly because of its premium flexibility, has changed that.
  • I recently heard one of our marketing people refer to replacement of old traditional permanent policies with Universal Life.
    • He called it "The Enlightened Liberation of Assets".

--  Stuart Grodanz, Travelers 

1984 - SOA - Variable Universal Life, Society of Actuaries - 22p

  • Bill White, chief actuary, New Jersey, reported on their special project pertaining to universal life. - <WishList>
  • Their commissioner, on June 25, 1982, declared an 81-day moratorium on "Universal-Flexible Factor" type of policies.
  • His staff was directed to
    • (1) study the matter and issue a position paper on the subject;
    • (2) conduct public hearings on March 10-11;
    • (3) terminate the moratorium April 16 with the publishing of a set of guidelines. - <WishList>
  • Reports and results have been mailed to each insurance department.
  • Some of the questions New Jersey conveyed included:
    • (1) are these policies participating or non-participating;
    • (2) the "Bait and Switch" potential;
    • (3) disclosure;
    • (4) Federal Income Tax aspects;
    • (5) non-forfeiture values;
    • (6) replacement problems.
  • The concern was not just with the "twisting" replacements, but was the impact of justified replacements on the solvency of replaced companies.

1982-2, NAIC Proceedings

  • Historically, companies were reluctant to replace life insurance because they might be in violation of the "twisting" laws.
    • Times have changed.
  • In 1969, the National Association of Insurance commissioners developed the 1970 Model Life Insurance Replacement Regulation.
    • This removed most of the "twisting" fears. 

--  William T. Tozer, ACLI

1981 - SOA - Individual Life Insurance Cost Disclosure Issues, Society of Actuaries - 22p

  • Most life insurance companies, it is true, will cancel the contract of an agent found guilty of replacing a policy already carried in his own or another company, by a new policy and such a practice is usually referred to as "twisting." (p21)

1940, NAIC Proceeding

  • ROWS ABOUT TWISTING
  • In the seventies, when life insurance companies in the United States were passing through the crucible, all sorts of things were done which nowadays are denounced, at least, if not avoided entirely.
    • The trouble was that more than half the life insurance companies of the country were in a failing condition, and their only hope often was to diminish their liabilities by twisting policies from one form to another or to escape the liabilities in whole, or in part, by making an arrangement with another company to furnish it a list of the policyholders, so that it could do the twisting.
    • The four or five companies that were swallowed up in the Universal reached an apparent state of solvency in that manner.
    • They had some kind of an understanding.

1898 - Book - Things Agents Should Know: An Intensely Practical Book for Life Insurance Agents - by Miles Menander Dawson 

  • Sharp competition was developing among companies and agents, the Massachusetts Commissioner complaining about agents besieging his office for information recommending their companies, or depreciating others," and the New York Superintendent protesting against agents'  commissions of from twenty-five to fifty per cent of first premiums, which resulted in the selling of policies by any and all methods, followed by a sad lapse record.30
    • Complaints of "twisting" also began to arise during this year.31  (p138)

1920 - Book - The History of Life Insurance in the United States to 1870: With an  Introduction to Its Development Abroad, by Charles Kelley Knight, University of Pennsylvania - [2xxp-GooglePlay]