Life Insurance Underwriting and Policy Issue

Fair credit reporting act of 1970

established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used

Medical info

for applicants of higher coverage or if application raised additional questions concerning prospective insured's health, underwriter may require medical exam with 2 options: insurer may only request paramedical report, completed by a paramedic or registered nurse; underwriter may require an attending physician's statement (APS) from a medical practitioner who treated the applicant for a prior medical problem

Policy effective date

if initial premium isn't collected w/ application, agent must collect premium at time of policy delivery; statement of good health may also be necessary signed by insured stating no illness or injury since application date

Policy issue and delivery

once company issues policy, agent will deliver policy to insured; personal delivery is preferred, but mail in is acceptable; advisable to obtain signed delivery receipt

Policy review

personal delivery allows agent to make sure insured understands all aspects of the contract; pointing out provisions or riders that may be different than anticipated, explaining how they affect the contract; explaining rating procedure and possible choices and provisions available to policy owner that may be active at this time

Underwriting

risk selection and classification process used to determine acceptability of applicants for insurance (is applicant insurable, and if so, what premium to charge)

Conditional Receipt

says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, unless coverage is declined or rated, or issued with riders excluding specific coverage

Agent's report

agent's personal observations concerning the proposed insured; doesn't become part of entire contract, but crucial part of application process

Required signatures

agent and proposed insured must sign application; if 3rd party insurance, policy owner must also sign; exception would be an adult (parent or guardian) applying for insurance of a minor

The agent

company's front line/field underwriter; responsibilities include: helping prevent adverse selection, proper solicitation of applicants, completing the application, obtaining the required signatures, collecting the initial premium and issuing the receipt, if applicable, delivering the policy

Backdating

sometimes it's possible to lower the premium rate by backdating an application for insurance; if applicant chooses to do this, the policy may be backdated for no more than 6 months before the date of application or medical exam- whichever is later; all premiums must be paid from the effective date of the policy; only allowable reason that application may be backdated is to affect a lower premium

Risk clarification

standard, substandard, and preferred, declined

The application

submitted to insurer for approval by person applying for insurance; one of the main sources of underwriting information for the company in the risk selection process; 2 basic components: general info, medical info

Unconditional (binding) receipts

used most often with property and casualty insurance; coverage begins immediately for a specific length of time (usually 30-60 days), until the policy is issued

Medical info bureau (MIB)

in addition to an APS, the underwriter will usually request a MIB report; MIB is a membership corporation owned by member insurance companies; nonprofit trade organization, which receives adverse medical info from insurance companies and maintains confidential medical impairment info on individuals; systematic method for companies to compare the info they have collected on a potential insured with info other insurers may have discovered; can only be used as an aid in helping insurers know what areas of impairment they may need to investigate further; APPLICANT CAN'T BE REFUSED BASED SOLELY ON INFO DISCOVERED THROUGH MIB

Statement of goodhealth

usually required by company at time of policy delivery, if insured's health has deteriorated since the application was completed and no money was taken, agent shouldn't accept money or deliver the policy unless directed to do so by the company; even if premium was accepted at application, agent should inform insurer of deterioration of health and wait for explicit directions as to whether the policy can be delivered and put into force