Last reviewed: 9 October 2026
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Insurance churning and twisting, explained
The short answer: twisting and churning are defined in each state's own insurance law, and the NAIC's replacement model regulation (Model #613) sets the paperwork and notice steps for replacements rather than defining either word. Florida's statute is one example: it defines twisting as knowingly making misleading representations or incomplete or fraudulent comparisons to induce someone to lapse, surrender or replace a policy[1], and churning as using the values of an existing life policy or annuity to buy another policy from the same insurer to earn additional compensation, in four listed circumstances[1]. Model #613 requires a signed statement about existing coverage and a replacement notice read to and signed by the applicant, and the replacing insurer must notify the existing insurer within five business days[2].
Correction (9 October 2026): an earlier version of this page said that Model #613 requires a producer to give the client a formal comparison of the existing and proposed contracts and to notify the existing insurer, and it defined twisting and churning as though the model supplied those definitions. In the NAIC text we read, the producer's duties (Section 3) are a signed statement about existing policies, a replacement notice (Appendix A) presented and signed, and delivery of sales material; the replacing insurer (Section 5) notifies the existing insurer; and the word "twisting" appears only in a bracketed placeholder pointing to a state unfair-trade-practices law, while "churning" does not appear.[2] The same earlier version also said that most states have adopted some version of the model; that is not stated in the NAIC model text, so it is removed. This page has been rewritten from those sources.
The short version
- Twisting and churning are state-law terms. Wording differs by state; read your own state's insurance code.
- Florida's definition of twisting covers misleading or incomplete comparisons of "any insurance policies or insurers", not only life insurance.[1]
- Florida's definition of churning is limited to using values in an existing life policy or annuity to buy another policy or annuity with the same insurer.[1]
- Model #613 treats a "financed purchase" (paying premiums on a new policy with money withdrawn, surrendered or borrowed from an existing policy) as a replacement.[2]
- Model #613 lists penalties that "may include" license suspension or revocation, fines and forfeiture of commissions.[2]
The two terms, as one state defines them
| Term | Florida statute (2026), section 626.9541(1) | What it does not say |
|---|---|---|
| Twisting, paragraph (l) | "Knowingly making any misleading representations or incomplete or fraudulent comparisons or fraudulent material omissions of or with respect to any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert any insurance policy or to take out a policy of insurance in another insurer."[1] | It is not limited to life insurance or annuities, and it turns on a knowing misleading statement or incomplete or fraudulent comparison made for the stated purpose, not on a replacement having happened. |
| Churning, paragraph (aa) | Policy values in an existing life policy or annuity (including cash, loan values or dividend values) used, directly or indirectly, "to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional premiums, fees, commissions, or other compensation" in any of these circumstances: (a) without an objectively reasonable basis for believing the replacement or extraction will result in an actual and demonstrable benefit to the policyholder; (b) in a fashion that is fraudulent, deceptive or otherwise misleading or involves a deceptive omission; (c) when the applicant is not informed that the existing policy's values will be reduced, forfeited or used, if that is the case; or (d) without informing the applicant that the new policy will not be paid up or that additional premiums will be due, if that is the case.[1] | It limits churning to using values to buy another policy or annuity with the same insurer; it does not itself say what other conduct the twisting paragraph or the replacement rules cover. |
The same Florida paragraph says churning by an insurer or an agent is an unfair method of competition and an unfair or deceptive act or practice, and requires each insurer to adopt written procedures to reasonably avoid churning.[1] Other states use different wording. This page does not say how any other state defines the terms.
What Model #613 asks of each party
Model #613 is the NAIC's Life Insurance and Annuities Replacement Model Regulation. The text posted by the NAIC is marked as a 2015 version with a Fall 2021 technical edit.[2] A model is a template; a state's own rule controls, and states can change the forms and timelines.
| Who | Model section | What the model text requires |
|---|---|---|
| Producer | Section 3 | Submit with the application a statement, signed by the applicant and the producer, on whether the applicant has existing policies or contracts. If the answer is "no," the producer's replacement duties are complete. If "yes," present and read the replacement notice (Appendix A) no later than when taking the application, signed by both, unless the applicant declines to have it read aloud; list each policy proposed to be replaced; leave the applicant the sales material; and send the insurer copies of the required documents.[2] |
| Insurer taking the application (the "replacing insurer") | Sections 4 and 5 | Verify the required forms; notify any other existing insurer that may be affected within five business days of receiving a completed application indicating replacement (or when a replacement is identified); give the owner notice of a right to return the policy within 30 days of delivery for a full refund; keep records for at least five years or until the next regular examination, whichever is later. It must also be able to monitor each producer's replacements, including replacements as a percentage of annual life sales.[2] |
| Existing insurer | Section 6 | Keep the replacement notifications it receives for at least five years or until its next regular examination, whichever is later; send the policy owner a letter about the right to receive information on the existing policy's values (an in-force illustration or, if one cannot be produced, a policy summary), with the information provided within five business days of the owner's request; and send a notice when the owner asks to borrow, surrender or withdraw policy values.[2] |
Section 1B lists transactions the regulation does not apply to "unless otherwise specifically included," among them credit life insurance, structured settlements and non-convertible term life policies that will expire in five years or less and cannot be renewed, with other exceptions.[2] Read Section 1B of your state's version before assuming a transaction is or is not covered.
What counts as a replacement
Section 2J defines a replacement as a transaction in which a new policy or contract is to be purchased and it is known or should be known to the proposing producer (or to the insurer if there is no producer) that, because of the transaction, an existing policy or contract has been or is to be:[2]
- lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer or otherwise terminated;
- converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;
- amended to reduce benefits or the term of coverage;
- reissued with any reduction in cash value; or
- used in a financed purchase.
A "financed purchase" (Section 2D) is the purchase of a new policy involving the actual or intended use of funds obtained by withdrawing or surrendering, or borrowing from the values of, an existing policy to pay all or part of a premium on the new policy. For a regulatory review of an individual transaction, when values are used this way to pay premiums on a new policy owned by the same policyholder and issued by the same company within four months before or thirteen months after the new policy's effective date, the model treats it as prima facie evidence of intent to finance the purchase with existing values.[2]
A worked example (hypothetical)
A policyholder with an existing whole life policy is asked to take a loan against it to pay the first premium on a new policy. Under Section 2D that is a financed purchase, and under Section 2J a financed purchase is a replacement.[2] The application should therefore carry the signed statement that the applicant has existing coverage, and the Appendix A notice should list the existing policy and mark it as a source of financing (the form's "F" column) rather than as replaced.[2] If the producer instead advised the applicant to answer "no" to the replacement questions to prevent notice to the existing insurer, Section 8A lists that as an example of a violation.[2] Whether the new policy is a good idea is a separate question this page does not answer.
What the model's own notice tells you to look at
The Appendix A notice says a replacement "may not be in your best interest, or your decision could be a good one," and tells the applicant to compare costs and benefits of the existing and proposed policies. Its checklist covers premiums (affordability, whether they can change, higher premiums at an older age), policy values (new policies usually take longer to build cash values; acquisition costs; surrender charges), insurability (a health change, a new medical exam, claims on most new policies for up to the first two years can be denied based on inaccurate statements, and suicide limitations may begin anew), and, for an annuity or interest-sensitive life product, surrender charges and interest-rate guarantees.[2] These are questions to take to the producer and the insurers; the notice also says to ask for and keep all sales material.[2]
What the model says about penalties and patterns
| Model section | Text |
|---|---|
| 8A | Any failure to comply is to be treated as a violation of the state's twisting section of its unfair trade practices act; the examples listed include deceptive or misleading sales material, failing to ask the pertinent questions about financing or replacement, intentionally recording an incorrect answer, advising an applicant to answer a replacement question negatively to prevent notice to the existing insurer, and advising an owner to write to the company so as to obscure the replacing producer or company.[2] |
| 8B | Owners may replace after indicating that replacement is not intended, but patterns of that happening among the same producer's customers are treated as prima facie evidence of the producer's knowledge that replacement was intended.[2] |
| 8D | Penalties "may include the revocation or suspension of a producer's or company's license, monetary fines and the forfeiture of any commissions or compensation paid to a producer as a result of the transaction"; where the commissioner finds violations material to the sale, the insurer may be required to make restitution and restore policy values. A drafting note says states should consider whether they have authority to adopt this subsection.[2] |
A pattern of replacements is a signal regulators and insurers monitor, not proof of misconduct on its own. Section 4B requires insurers to be able to produce each producer's replacements as a percentage of annual sales.[2]
What this means for you
If you are asked to replace a life insurance policy or annuity, expect to be asked whether you have existing coverage, to sign a replacement notice, and to be handed the sales material. If any of that did not happen, you can raise it with your state insurance department; see how to file a complaint against an agent. A Section 1035 exchange is a tax concept and does not replace these disclosures; see our 1035 exchange explainer. The paperwork itself is walked through in the replacement-notice guide, the refund window in the free-look guide, and annuity sales standards in the annuity best-interest explainer. This page is general information, not legal advice, and it says nothing about any particular agent, insurer or product.
Related checks
Our standard explains how we check an agent's license and disciplinary history. Check an agent reports our findings at category level, as a method and not a verdict. Neither reviews any insurer, plan or product. To see whether an agent already has a public finding against them, see how to search a disciplinary record and what can get a license suspended or revoked. For how life policy types differ, see term, whole and universal life.
When we will update this page
We re-read the sources when they change. If something here is out of date, tell us. Corrections are dated on the page.
References
- [1] Florida Senate, 2026 Florida Statutes, section 626.9541 (unfair methods of competition and unfair or deceptive acts or practices defined), paragraphs (1)(l) and (1)(aa), read 8 October 2026 — flsenate.gov/Laws/Statutes/2026/626.9541
- [2] National Association of Insurance Commissioners, Life Insurance and Annuities Replacement Model Regulation (Model #613), Sections 1 to 8 and Appendix A, read 8 October 2026 — content.naic.org/sites/default/files/model-law-613.pdf
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