CA LAH Ch 3
The Fair Credit Reporting Act states that an applicant for insurance must be notified: A. Of the eligibility of the proposed insured B. Of the details of an investigation on the applicant C. Of any investigative report ordered by the insurer D. Of the insurability of the proposed insured
Of any investigative report ordered by the insurer
Which of the following risk classifications is characterized by a lower annual premium? A. Personal risk B. Substandard risk C. Standard risk D. Preferred risk
Preferred risk
What type of insurance receipt provides immediate coverage from the date of application, regardless of the underwriter's decision.
Binding
Which of the following receipts provides coverage for an insured immediately upon the payment of the premium? A. Binding receipt B. Insurability receipt C. Conditional receipt D. Approval receipt
Binding receipt
All are sources of information used by the underwriting department to help determine risk except:
Blood type
Which of the following choices is not a source of information utilized by the underwriting department to evaluate the risk of an applicant?
Blood type
Insurance companies who intentionally violate the AIDS/HIV disclosure requirements may be penalized:
By a civil penalty ranging from $1,000 to $5,000 plus possible legal expenses
An Underwriting Department cannot use which of the following underwriting information to determine whether an application will be approved or issued?
Marital Status
Which of the following is not evaluated by the underwriting department when reviewing a possible application for insurance?
Marital status
Charles completes an application for a $2,000,000 life insurance policy on May 7th, which included a mandatory medical exam that he completed on May 12th. When applying for coverage, he provided the required initial premium and received a conditional receipt. The policy was approved and it was mailed to the producer on July 10th. The agent delivered the policy to Charles on July 22nd. Charlie's insurance protection actually began on:
May 12th
A policy is approved on November 1st and is sent to the agent of record who receives the policy on November 5th. The agent then delivers the approved policy to her 30-year-old client on November 9th. When would the free-look period end?
November 19th
Common preselection activities that an agent engages in would include:
Obtaining important information, such as contact information for the applicant's doctor
Common preselection activities that an agent would engage in would include:
Obtaining important information, such as contact information for the applicant's doctor.
Carl completes an application for a $10,000,000 life insurance application which included a mandatory medical exam which he completed on October 12. When applying for coverage he provided the required premium, completed the application and received a conditional receipt. The policy was approved on December 22 and was mailed to the agent on December 29th. The policy was delivered on January 1st. When did Carl's coverage actually become effective?
October 12
What is the maximum amount of premium that can be charged a dependent under Cal-COBRA as compared to the premium paid by the employer for their employees?
1.1
Cal-COBRA applies to employers that have how many employees?
2-20
John buys John buys life insurance for his wife Shirley. How many signatures will be needed?
3
When a policyowner purchases a contract covering the life of another individual, how many total signatures will appear on the application?
3
What is the maximum length of benefit extension under Cal-COBRA?
36 months
An Insurance Company who intentionally discloses AIDS/HIV testing date may be penalized:
A civil penalty ranging from $1,000 to $5,000 plus possible legal expenses.
Which of the following is provided to an applicant when a premium is collected along with an application for life insurance? A. A ten-day free look B. A producer or agent's report C. The entire contract D. A conditional receipt
A conditional receipt
If an applicant for life insurance is considered a substandard risk by an insurer but still insurable, the insurer will probably take which of the following actions? A. Issue a standard policy B. Accept the risk and increase the number of exclusions C. Decline the application D. Accept the risk and charge an extra premium
Accept the risk and charge an extra premium
If an applicant for life insurance is considered a substandard risk by an insurer but still insurable, the insurer will probably take which of the following actions: A. Issue a standard policy B. Decline the application C. Accept the risk and rate-up the premium D. Accept the risk and increase the number of exclusions
Accept the risk and rate-up the premium
What options does an underwriter have when an applicant for life insurance is deemed by the underwriter to be a substandard risk?
All of the above
Which of the following is a primary purpose of a Medical Information Bureau (MIB) report? A. Allows insurer to receive medical history from applicant's personal physician B. Allows insurer to deny claims for pre-existing illnesses C. Allows insurer to reduce death claim amounts D. Allows insurer to avoid high risk applicants
Allows insurer to avoid high risk applicants
Which COBRA statement below is not correct?
An 18 month extension is allowed for a child who leaves the family group plan.
Which COBRA statement below is NOT CORRECT?
An 18-month extension is allowed for a child who leaves the family group plan.
An MIB may contain information about: A. Risk classifications B. An applicant's previous health history C. Adverse selection D. Consumer reports
An applicant's previous health history
Applications for life insurance must be signed by the appropriate parties. Which of the following are required to sign a life insurance application? A. Applicant and producer B. Applicant and insurer C. Policyowner and producer D. Producer and insured
Applicant and producer
Which of the following statements regarding the Fair Credit Reporting Act (FCRA) is correct? A. Applicants must be notified within a short period of time that their credit report has been requested B. If requested to do so, the insurance company must provide the actual consumer report to the applicant C. If an applicant for insurance is rejected based on a consumer report, the name of the reporting agency must be kept confidential D. Consumer reports are final in nature and cannot be disputed by an applicant
Applicants must be notified within a short period of time that their credit report has been requested
Jimmy completes a life insurance application on Delores and collects the initial premium. A conditional receipt is provided to the applicant. If the underwriting department approves the application without a medical exam, when will coverage become effective?
As of the date listed on the receipt
Colin completes a life insurance application on Maggie and collects the initial premium. A Conditional Receipt is provided to Maggie. If the underwriting department approves the application without a medical exam, when will coverage become effective?
As of the date listed on the receipt.
When a producer completes an application and collects the initial premium, he or she must leave a premium receipt with the applicant. A conditional premium receipt states that coverage is effective: A. When the policy is delivered B. As of the date the application is approved by underwriting C. When the policy is issued D. As of the date of receipt if the application is approved
As of the date of receipt if the application is approved
Insurable interest in a life insurance policy must exist:
At the time of original application
When will an insurer request that an insured sign a statement of continued good health?
At the time of policy delivery, just prior to premium collection and policy delivery.
An underwriter reviews Accident & Health applications to assess an individual risk. Sound and competent underwriting helps the underwriter and insurer to accomplish which of the following? A. Remit greater commissions B. Increase persistency C. Avoid adverse selection D. Increase production
Avoid adverse selection
Immediate coverage until the underwriter disapproves an application for insurance may describe what receipt below?
Binding
An applicant for a life insurance policy is found to be a substandard risk. If the insurance company's underwriting department approves the application, it will also most likely: A. Require insurability each year B. Substandard risks are never insurable C. Place the application in a high risk pool D. Charge a higher premium
Charge a higher premium
If no premium is paid with an application for life insurance, what responsibilities does a producer possess when the policy is delivered? A. Collect the premium and a statement of continued good health and issue a premium receipt B. Collect the premium and a blood sample C. Collect the premium and issue a premium receipt D. Collect the premium and additional health history data
Collect the premium and a statement of continued good health and issue a premium receipt
The Medical Information Bureau (MIB) is an important resource for an underwriter. Which statement below is not true regarding the MIB?
Creditors of the applicant can access the MIB.
Which statement below is false regarding the MIB?
Creditors of the applicant can access the MIB.
The primary purpose of the Medical Information Bureau (MIB) is to: A. Discover misrepresentation and fraud B. Prevent over insurance C. Provide detailed medical information to a physician D. Assist medical professionals
Discover misrepresentation and fraud
What mandatory provision requires that the policyowner receive both the policy and a copy of the original application?
Entire Contract
It is a requirement that the application be attached to an approved policy and then provided to the policyowner. What mandatory provision requires that the policyowner receive both the policy and a copy of the original application?
Entire contract
Methods of policy delivery that are acceptable in California would include all of the following except:
First Class mail
What provision begins when a policy is delivered?
Free Look Provision
Yolanda applies for a life insurance policy on March 8th. The application is sent to underwriting on March 9th. Approval is provided by the insurer on March 17th. The policy is issued March 19th and the agent delivers the policy to Yolanda on March 22nd. What provision begins upon the policy delivery?
Free-Look provision
A producer completes an application but does not collect an initial premium. He later finds out that the proposed insured has been diagnosed with a serious illness after the application was completed. The producer should: A. Inform the applicant that the illness will have no impact upon the issuance of the policy B. Deliver the policy once it is issued C. Inform the insurer of this new information immediately D. Do nothing and allow the insurer to underwrite the application
Inform the insurer of this new information immediately
Which of the following is not a responsibility of a field underwriter? A. Provide a premium receipt to an applicant B. Complete applications C. Collect premium D. Issue a policy
Issue a policy
A life insurance policy is issued to an applicant. What becomes of the original application?
It (or a photocopy) is attached to the actual policy, and is considered part of the entire contract.
Once a policy is issued, what becomes of the original application?
It (or a photocopy) is attached to the actual policy, and is considered part of the entire contract.
The Fair Credit Reporting Act is a federal regulation enacted in 1971. Which of the following is its purpose? A. It provides guidelines on premium financing B. It establishes procedures for consumer reporting agencies C. It is not applicable to the health insurance industry D. It prevents the use of information concerning an individual's character
It establishes procedures for consumer reporting agencies
Which of the following statements regarding the Fair Credit Reporting Act of 1971 is NOT CORRECT?
It is only applicable in the health insurance industry.
Which statement below is incorrect regarding the Fair Credit Reporting Act of 1971?
It is only applicable in the health insurance industry.
Jack wishes to buy life insurance on his eighteen year old son. Who must sign the application? A. Jack B. His son C. Jack and his son D. Neither
Jack and his son
An underwriter reviews applications and assesses risk. Each of the following may be a source of underwriting information, EXCEPT: A. Ledger statements B. Medical Information Bureau report C. Blood test results D. Attending physician's statement
Ledger statements
Applications for coverage are usually accompanied by an initial premium. An applicant who submits an application to the insurer without an initial premium has: A. Made an invitation B. Offered an acceptance C. Made an offer D. Accepted an offer
Made an invitation
An agent fills out an application but neglects to list the beneficiary designation. What will the insurer do when it receives the incomplete application? A. Deposit the initial premium B. Return the application to the agent C. Issue the policy D. Underwrite the application
Return the application to the agent
An insurance company would probably prefer to not place business with which risk below?
Substandard
All of the following statements regarding AIDS/HIV testing in California are TRUE, except:
Suspected marital status or sexual orientation can be used to determine who is most likely to test positive for AIDS/HIV.
All statement below is false regarding California AIDS testing?
Suspected marital status or sexual orientation can be used to determine who is most likely to test positive for AIDS/HIV.
Each of the following is a form of risk classification utilized by life or health insurance underwriters, EXCEPT: A. Substandard risk B. Tabular risk C. Standard risk D. Preferred risk
Tabular risk
A binding receipt is also called a:
Temporary Insurance Agreement
Another term for a binding receipt is:
Temporary insurance agreement
A consumer's privacy rights and the use or distribution of collected data by an insurer is outlined in which of the following?
The Fair Credit Reporting Act
The Medical Information Bureau is a clearing house of information cataloguing an applicant's responses with regard to his or her insurability that appear on a life insurance application. Which of the following best describes the purpose of the MIB? A. The MIB allows an insurer to check application information against the health history of the proposed insured B. The MIB provides consumers with rights if their application for insurance is denied C. The MIB allows the insurer to acquire information about an applicant by securing a consumer report D. An MIB allows an insured to acquire further health history information from an applicant's personal physician
The MIB allows an insurer to check application information against the health history of the proposed insured
An agent obtains valuable information when meeting with an applicant for insurance. Where would the underwriter discover information collected by the agent, that is not a response to an application question?
The Producer or Agent Report
An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit Reporting Act (FCRA), all of the following statements are true with regard to this scenario, EXCEPT: A. Bankruptcies may be reported for up to a ten year period B. The reporting agency may not disclose old negative information that predates the report by more than seven years C. The applicant has the right to secure the information in the report directly from the insurance company D. The applicant has the right to obtain the substance of the information in the consumer report from the reporting agency
The applicant has the right to secure the information in the report directly from the insurance company
If a policy can be issued without a medical exam requirement, when is the earliest date coverage could become effective?
The date listed on the receipt
When there is no medical exam requirement, when is the earliest date a life insurance policy could begin to provide coverage?
The date listed on the receipt
Each of the following are important life or health insurance underwriting factors, EXCEPT: A. Medical history B. Consumer report C. The initial premium D. The agent's report
The initial premium
Insurers utilize several sources of information in order to make underwriting decisions. Each of the following are important underwriting factors, EXCEPT: A. The agent's statement or report B. Health history of the proposed insured C. The application information D. The initial premium paid
The initial premium paid
Insurers utilize several sources of information in order to make underwriting decisions. Each of the following are important underwriting factors, EXCEPT: A. The initial premium paid B. The agent's statement or report C. The application information D. Health history of the proposed insured
The initial premium paid
A home office underwriter receives the greatest amount of insurability information from which of the following sources? A. The medical information report B. The insurance application C. An attending physician's statement D. A consumer report
The insurance application
The Fair Credit Reporting Act requires that a notice to the applicant be included and a premium receipt provided to a life insurance applicant. This notice explains that: A. Credit terms are included in contracts providing whole life or term insurance B. Insurers will require medical exams for all applicants C. Premiums will be refunded after the free-look period expires D. The insurer may conduct an investigative consumer report at its discretion
The insurer may conduct an investigative consumer report at its discretion
Each of the following factors is of primary importance when underwriting life or health insurance, EXCEPT: A. The age and sex of the proposed insured B. The marital status of the proposed insured C. Medical history of the proposed insured D. The occupation of the proposed insured
The marital status of the proposed insured
A life or health insurer that underwrites risks properly and according to company guidelines will be more profitable than an insurer that does not engage in such activity. What is the primary purpose of underwriting? A. To avoid adverse selection B. To provide incentives for its sales force C. To write a larger share of the market D. To increase persistency
To avoid adverse selection
The underwriting department of an insurer is a very important department with regard to company profitability. What is the primary purpose of this department?
To minimize or prevent adverse selection
What is the primary purpose of the Underwriting Department?
To minimize or prevent adverse selection.
John applies for life insurance and pays an initial premium. He is provided with an insurability type of conditional receipt. The next day John dies in an auto accident. The insurer is notified by John's wife the following day. What action will the insurer take? A. Deny any death claim and refund any premium paid B. Refuse to underwrite and retain the premium C. Underwrite the policy and if John is found insurable, the insurer will pay the claim D. Issue a policy if John is found insurable but deny any claim since he died before the completion of the free look period
Underwrite the policy and if John is found insurable, the insurer will pay the claim
All of the following are factors which affect a life insurance risk, EXCEPT: A. Occupation B. Age C. Unearned income D. Family health history
Unearned income
If a premium is not paid at the time an application for life insurance is completed, when will coverage go into effect? A. When the producer delivers the policy and collects the premium B. When the application is approved and the policy is issued C. As of the date of the conditional premium receipt D. At the time of application
When the producer delivers the policy and collects the premium
