Georgia Adjuster Practice Test

How does churning generally affect the policyholder?

1. It usually benefits the policyholder greatly

2. It offers the same coverage without any alterations

3. It often confuses the policyholder with changes

4. It ensures long-term loyalty with the insurer

The correct answer is: It often confuses the policyholder with changes

Churning refers to the practice of repeatedly replacing insurance policies to generate commissions for agents, often without providing substantial benefits to the policyholders. This can create confusion for the policyholder due to the numerous changes in their coverage, terms, and premiums. When a policyholder is subjected to churning, they may struggle to understand the differences between their previous and new policies, which can lead to a lack of clarity about what they are actually covered for. This confusion can undermine their trust in the insurance process and disrupt their financial planning as they try to navigate the various changes. The resulting complexity can make it difficult for policyholders to confirm whether their insurance needs are still being met effectively. In contrast, the other options depict a scenario where churning would either benefit the policyholder or maintain their coverage, which does not reflect the typical outcome of such practices. Option D suggests that churning leads to long-term loyalty, which is unlikely given that policyholders may become frustrated and dissatisfied with constant changes.