Controlled business *****

Controlled business is when an insurance agent sells insurance policies on his/herself and others with whom the agent has a financial likeness. This would include things such as himself herself or members of his or her family; officers, directors, stockholders, partners or employees of a business in which he or she or a member of his or her family is engaged; or the debtors of a firm, association or corporation of which the agent is an officer, director, stockholder, partner or employee.

Now, it is perfectly legal to sell policies to people with whom the agent has a financial interest, but Florida law requires that anyone who holds a license in the state must also hold themselves out to the general public. Therefore, an agent can write controlled business provided that the premiums of other policies sold to the public written during any 12 month period are greater than or equal to the amount of controlled business written. (Note...You can not have more "controlled" business than non-controlled.)

Twisting *****

Policy replacement involves using the values of one policy to purchase a different policy. Replacement is completely legal and happens on a relatively regular basis, but there are times when replacements are inappropriate and not the best course of action for the insured. This is why replacements require certain paperwork, discussed in chapter 4, to justify the replacement. An inappropriate replacement of another company's insurance policy is considered twisting, and this would involve misleading representations or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, or convert any insurance policy, or to take out a policy of insurance in another insurer.

Churning *****

Churning would involve using the values in an existing life insurance policy or annuity to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional premiums or commissions:

• without a reasonable basis for believing that the replacement will result in a benefit to the policyholder;
• when the applicant is not informed that the policy values of the existing policy or contract will be reduced, forfeited, or used in the purchase of the replacing or additional policy or contract; or
• without informing the applicant that the replacing or additional policy or contract will not be a paid-up policy or that additional premiums will be due, if this is the case.

Unlawful rebates *****

This is some more detailed information about the rebates that were discussed earlier in the chapter. A rebate would involve knowingly doing any of the following:

• paying, as inducement to purchase the contract, any unlawful rebate of premiums payable, any advantage in the dividends or other benefits; or
• giving, as inducement to purchase the contract, any stocks or other securities of any insurance company or anything of value whatsoever not specified in the insurance contract.

The following would not considered unlawful rebates:

• Paying bonuses or reducing premiums to policyowners, so long as it is fair and equitable to all policyholders and for the best interest of the company and its policyholders
• Readjustment of the premium rate for a group insurance policy based on the claims costs and overhead expenses for the group for the year
• Offering group insurance premiums that are cheaper per person than individual insurance rates
• Offering savings when the policyowner uses a payroll or automatic debit payment system to pay premiums