Legal Inquiry:

Churning or Twisting - The act of inducing or attempt to induce a

policy owner to drop an existing life insurance policy and to take
another policy that is substantially the same kind by using
misrepresentations or incomplete comparisons of the advantages
and disadvantages of the two policies. 1 It is a prohibited practice
or behavior of Agents as provided for by the 2013 Market Conduct
Guidelines2

Examples of Churning Policies according to the 2013 Market

Conduct Guidelines3:

1.) Terminating a policy within a short period of time or

before its maturity date and buying a new policy soon after.

2.) Terminating a cash policy and buying a similar policy or

vice versa when a change of payment or source or conversion
could have been exercised.

3.) Withdrawing from the old funds or plans and buying into
new funds or plan without using the facility available in the
policy for switching of funds where the commissions are not
payable.

4.) Generating funds in order to buy a new policy, by:

a. withdrawing monies from an existing policy, including

making partial surrender, withdrawing from
investment-linked policy, taking a policy loan; or

1Glossary of International Risk Management Institute, Inc. (an online library for risk managers
and insurance professionals)
2 Insurance Commission Circular Letter No. 2013-33
3 Insurance Commission Circular Letter No. 2013-33
 b. reducing or terminating an existing regular premium
commitment, including advance premium loan,
vanishing premium, reduction of sum insured,
conversion of the existing regular premium to paid-up
policy or extended term insurance.

My understanding: The insurance agent employs machinations to

defraud the policyholder into foregoing the existing policy in lieu of
a new one which is substantially the same. The agent’s motive is
to reap the benefits of an incentive or commission based on the
sale of the new policy. The policyholder may use the cash value of
the existing policy to purchase the new policy.

Pooling- Agents are not allowed to pool cases or to pass cases

that they have underwritten to another agent. The underwriting
Agent on record must be present at the time of the sale and
participate in the presentation to the prospect/client and also at the
time of signing of the proposal form by that prospect/client. It is a
form of manipulating sales by an agent in order to qualify for
incentives, contests or awards.4

My understanding: The underwriting agent who is the one who

assessed the risk of insuring the prospect/client and determines the
price of premiums of be paid must be present at the time of sale,
presentation and the actual signing of the policy. He cannot pass
to another agent such duties without his supervision and
participation in the consummation of the contract.

4 Insurance Commission Circular Letter No. 2013-33