01 Field Underwriting Procedures

What are the elements of a contract?

1. Agreement - Offer and acceptance 2. Consideration - The binding force in any contract 3. Competent parties 4. Legal Purpose

What is a statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company?

A Material misrepresentation

An agent is in the process of replacing the insured's current health insurance policy with a new one. Which of the following would be a proper action? A. The old policy should stay in force until the new policy is issued. B. There should be at least a 10-day gap between the policies. C. Policies must overlap to cover pre-existing conditions. D. The old policy must be cancelled before the new one can be issued.

A. The old policy should stay in force until the new policy is issued. The agent must make sure that the current policy is not canceled before the new policy is issued.

An insurance contract must contain all of the following to be considered legally binding EXCEPT A. Competent Parties B. Beneficiary's consent C. Offer and acceptance. D. Consideration

B. Beneficiary's consent

Which of the following includes information regarding a person's credit, character, reputation, and habits? A. Agent's report B. Consumer Report C. consumer history D. insurability report

B. Consumer Report

What information are the members of the Medical Information Bureau required to report?

Adverse medical information about the applicants or insured

What is the term used for a written request for an insurer to issue an insurance contract based on the provided information?

Application

An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have, and then leaves. What did he forget to do?

Ask her to sign a statement of good health If the premium is not collected until the policy is delivered, the agent must receive a statement of good health, which acknowledges that the insured's health status has not changed since the policy was approved

If an underwriter requires extensive information about the applicant's medical history, what report will best serve this purpose?

Attending Physicians Statement

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A. The Customer has no knowledge of this action B. The customer's associates, friends, and neighbors provide the report's data. C. They provide additional information from an outside source about a particular risk D. They provide information about a customer's character and reputation.

B. The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends, and neighbors of the consumer.

An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point? A. Approved the application B. Issued the policy C. Neither approved the application nor issued the policy D. Both approved the application and issued the policy

C. Neither approved the application nor issued the policy When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.

Which of the following is NOT the consideration in a policy? A. The premium amount paid at the time of application B. The promise to pay covered losses C .The application given to a prospective insured D. Something of value exchanged between parties

C. The application given to a prospective insured Consideration is something of value that is transferred between the two parties to form a legal contract.

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

Conditional

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as?

Contracts of adhesion

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? A. Adhesion B. Personal C. Unilateral D. Conditional

D. Conditional A conditional contract requires both the insurer and policy owner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.

Which of the following would provide an underwriter with information concerning an applicant's health history? A. A medical examination B. The agent's report C. The inspection report D. The Medical Information Bureau

D. The Medical Information Bureau An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

When would a misrepresentation on an insurance application be considered fraud?

If it is intentional and material

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons

Who is responsible for paying the cost of a medical examination required in the process of underwriting?

Insurer

What entities make up the Medical Information Bureau?

Insurers

Whhe best way to make a change on an application for insurance?

Start over with a fresh application

If an insurer decides to obtain medical information from different sources in order to determine the insurability of an applicant, who must be notified of the Investigation?

The Applicant

What is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals?

The Medical Information Bureau (MIB)

Whose responsibility is it to determine if all of the questions on a n application have been answered?

The agent

Whose responsibility is it to inform an applicant for health insurance about the insurer's information gathering practices?

The agent

If an agent makes a correction on the application for health insurance, who must initial the correct answer?

The applicant

What is the entire contract in heal insurance underwriting?

The application and the policy issued

In health insurance, the policy itself and the insurance application form what?

The entire contract

Who must sign a health insurance application?

The policyowner The insured (if different) The agent

When should an agent obtain a statement of good health from the insured?

When the premium was paid upon policy delivery and not at the time of the application

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? a. warranty b. aleatory c. adhesion d. subrogation

b. aleatory