Churning in insurance sales is best described as

• A. Maintaining an existing policy without changes.
• B. Renewing coverage with no need for replacement.
• C. Replacing a policy to generate new commissions rather than benefit the client.
• D. Switching to a policy with identical terms.

Answer: (C)

Churning is the practice of replacing an existing insurance policy with a new one primarily to earn a new commission for the agent, rather than to benefit the client. This often involves pressuring the client to switch, with the new policy bringing in fresh commissions but potentially higher costs, charges, or loss of favorable features from the old contract. The emphasis is on the agent’s financial incentive rather than the client’s needs, and regulators typically view this as inappropriate or unethical.

Normal maintenance like keeping a policy as is, renewing coverage without replacing, or switching to a policy with identical terms does not involve creating a new commission structure through unnecessary replacement. Those scenarios are routine or neutral in terms of benefits and costs, whereas churning centers on replacement driven by the agent’s compensation rather than the client's best interests.