It's not immediately apparent that he's losing cash value because he's paying the same premiums. Once a policyholder has been paying into a whole life insurance policy for a while, its cash value builds up, making the policy more valuable. What these agents neglect to tell their customers is that their existing policies are usually quite adequate for their needs, and that when they use the built-up cash value to purchase a new policy, they start from square one in building up cash value in the new policy. This practice of convincing a customer to use an older policy's cash value to pay for a newer, unnecessary policy is called churning. It's also referred to as twisting.
Agents churn because they earn a commission for each new policy they sell.
The fallout from churning isn't immediately apparent. A customer doesn't have to shell out any money up front because the built-up cash value of the existing policy pays the initial premiums of the new one. A policy's cash value is actual money that the policyholder owns, although usually just on paper. Cash value can be used as security for a loan or converted into an annuity. And if a policyholder decides to cancel a life insurance policy with built-up cash value, she's entitled to that money, minus the surrender charge.