What is churning in the context of insurance policies?

Churning in insurance refers specifically to the practice of using the cash value or benefits from an existing insurance policy to purchase a new policy, often to the detriment of the insured. This practice is generally frowned upon because it can result in unnecessary costs, including additional fees, commissions, or poorer coverage for the policyholder.

In this context, the correct answer highlights the problematic nature of this method, as agents may encourage clients to replace their existing policies simply to generate new commissions for themselves. Often, the client may not fully understand the long-term consequences or may not receive appropriate value from the new policy relative to the costs incurred from the old policy.

This contrasts sharply with the other options. For instance, frequently switching agents does not inherently involve the manipulation of policy values, and increasing coverage without consent does not effectively capture the essence of churning, which is specifically about the replacement of policies. Likewise, underwriting policy changes pertains to the assessment of risk rather than the unethical practice of transferring values from one policy to another.