unethical practice of convincing a customer to trade unnecessarily, thereby generating a commission for the broker or salesperson. Examples: A broker may induce a customer to sell one mutual fund with a sales charge in order to buy another fund, also with a sales charge, thereby generating a commission. A life insurance salesperson may persuade a policyholder to cancel his or her policy or allow it to lapse, in order to sell the insured a new policy, which would be more costly but which would produce sizable commissions for the salesperson. Also called churning.
unfair trade practice, in insurance, whereby an agent or broker attempts to persuade a life insurance policyholder through misrepresentation to cancel one policy and buy a new one. Some states have laws requiring full disclosure of relevant comparative information about existing and proposed policies by an agent trying to convince a customer to switch policies. These laws may provide for notification of the insurance company that issued the existing policy to give it an opportunity to respond to the agent's proposal.
