This unethical practice involves an insurance agent inducing a policyholder to cancel an existing insurance policy and purchase a new one, often from the same agent or company. The replacement policy may not offer any significant benefit or may even be less suitable for the policyholder’s needs. A common example is an agent persuading a client to surrender a life insurance policy with accumulated cash value to buy a new policy, even if the new policy’s benefits and costs do not justify the change.
The primary consequence of such actions is financial harm to the policyholder. They may incur surrender charges on the old policy, face increased premiums on the new policy, and potentially lose valuable benefits or coverage that were present in the original policy. Historically, regulations have been implemented to protect consumers from such manipulative sales tactics, ensuring agents act in the best interest of their clients and provide accurate information about policy changes.
