What does coercion mean in insurance?

You shouldn't have to worry about your insurance agent using deceptive tactics to make a quick buck. These acts are illegal in most states. However, you should know what to look out for when it comes to coercion in insurance.

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Chris Tepedino is a feature writer that has written extensively about home, life, and car insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and C...

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent Laura Walker

UPDATED: Mar 30, 2022

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The Rundown

  • Insurance companies and agents can commit illegal acts such as coercion, rebating, twisting, and churning
  • Coercion can happen in many different ways, with or without the customer’s knowledge 
  • Insurance brokers could secretly switch a policyholder’s coverage for that of a similar policy with worse benefits

Coercion is the act of forcing or intimidating a person into doing something against their will. A person may persuade another to do something they wouldn’t normally do through threatening displays of the power of either physical or psychological means. Any act that is intended to remove a person’s free will is considered coercion and, if proven, is considered a duress crime. It can even involve the actual infliction of physical pain or psychological harm to support the credibility of a threat. 

What is coercion in relation to insurance?

You might be aware that coercion can happen in the workplace or in other aspects of your life, but it can also occur in the realm of insurance. In regard to insurance, coercion transpires when someone in the insurance business applies either physical or mental force — or the threat of force — to persuade an individual to purchase insurance coverage. Any action that the agent inflicts through coercion is considered illegal.

Types of Coercion

Coercion occurs in many ways. These are the most common ways that coercion happens in insurance.

Psychological coercion

The first way that an insurance agent can use coercion to convince an individual to transact insurance is through psychological pressure. And this would directly affect the mental and emotional state of the person due to the duress. It is easier to persuade a person to unwillingly purchase insurance if their mental state is compromised.


Another way to coerce a person into buying insurance is through blackmail. Blackmail is demanding something from another individual in return for not revealing embarrassing or compromising information about them. An insurance agent could possibly use the information they learn about a potential customer to “convince” them to buy a policy or to spend more money than they intend to expend.

Unknowingly upgrade

Instead of blackmail, an insurance broker could include upgrades and more expensive benefits without the new policyholder’s knowledge. Then, once the policyholder finds out, they may be too intimidated to say anything about it.


Some insurance agents may use threats and force to make a person take out an insurance policy. This usually happens after they attempt a normal sale of the policy and the agent resorts to using power to get them to agree to go through with it.

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What are some examples of insurance coercion?

In order to really know what insurance coercion is, let’s consider some coercion scenarios:

  • Blackmail. An insurance agent is selling company insurance packages for its employees. The CEO doesn’t want to comply with it, but the agent reveals that they have pictures of him with a woman who isn’t his wife. If the CEO buys the insurance, the agents won’t release the photos. This is an example of coercion through blackmail.
  • Psychological coercion. Someone with little to no knowledge of insurance is trying to purchase a policy. If an insurance agent takes advantage of that unenlightenment to manipulate them into purchasing a plan that the person doesn’t need, that’s psychological coercion. The agent might even attempt to gaslight them into thinking that it’s the best option for them.
  • Threatening behavior. Maybe a policyholder wants to cancel their policy and get insurance elsewhere. If the insurance company or agent says that there will be consequences — aside from a cancellation fee — this is coercion through threatening behavior.
  • Unintentional upgrade. Let’s say that an older couple wants a life insurance policy. They are slightly confused about the process, and the agent intetionally adds more expensive benefits that the couple isn’t aware of. Then, they find out after the first payment and don’t know what to do, so they don’t do anything at all and continue paying the higher premium.

Is coercion illegal in the insurance business?

Coercion can be a misdemeanor or a criminal offense depending on the situation. If someone uses coercion to get another person to commit a felony, then that is a serious criminal offense and can result in jail time. In the insurance business, it is considered an illegal trade act practice.

What is rebating in insurance?

In the insurance industry, coercion isn’t the only unethical or illegal practice that can occur. Another deceptive practice that companies and agents use to convince people to buy insurance is called rebating. Rebating is the act of offering something of value to the prospective insurance buyer that isn’t included in the policy. In every state except Florida and California, which have strict guidelines, rebating in insurance is illegal and prohibited.

The following is a list of rebating scenarios:

  • A prospective insurance buyer receives a refund of some or all of the commission for the insurance sale
  • An insurance broker offers a cash gift
  • Offering Gifts
  • Providing services
  • Payment of premiums
  • Employment offers
  • Any other item of value

The National Association of Insurance Commissioners (NAIC) promoted the Model Act. Under the Model Act, the rebating action of dividing commission and giving money to the consumer to purchase insurance is considered a deceptive practice and an unfair method of competition.

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What’s the difference between twisting and churning in insurance?

If you’ve been researching illegal insurance practices, you may have come across the terms twisting and churning. Although they are both somewhat similar activities, they occur under different circumstances and for different reasons.


Are you wondering what is twisting in insurance? Twisting is the act of persuading a policyholder to replace their policy for a similar one, often with misleading information. Typically, it’s not in the customer’s best interest to switch policies, but they are convinced through deception. Twisting is beneficial for the insurance agent but can be harmful to the policyholder, who can lose time and money.


Churning in insurance occurs when an insurance broker purposefully replaces a policyholder’s insurance policy for another policy with another insurer. Usually, this is done without the knowledge of the policyholder and doesn’t actually change any of the coverage. It merely provides the agent another commission for the policy that they swap, which is totally illegal.

Can there be defamation in insurance?

In short, yes, defamation can occur in insurance. But what is defamation in insurance? Defamation is a false statement about someone that harms their reputation. There are two types of defamation, including slander (oral statements) and libel (written statements). Insurance can cover you from defamation. It usually falls under liability or personal injury coverage and can protect against damages caused by defamation.

How to report illegal insurance activity

If you or someone you know is a victim of illegal insurance activity, various organizations can assist you. Many states have fraud and abuse helplines that you can easily find through a simple Google search. For example, Pennsylvania has a web page on its Department of Human Services site with a tipline to report provider or recipient fraud. You can also report illegal insurance acts to the FBI or to the National Association of Insurance Commissioners (NAIC).

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