CH 8

A premium is paid at the time of application and a conditional receipt is issued. If the policy is issued as applied for, and assuming a medical exam has already been completed, coverage becomes effective:

At the date of application

Which of the following documents used for underwriting can be completed by talking to the proposed insured over the phone?

Inspection report

Before a policy will be issued, an insurable interest must exist between the owner (applicant) and the

Insured

Ultimately, insurability of an applicant is determined by the

Insurer's home office underwriter

The _________ was created in order to alert insurer home office underwriters of errors, omissions, or misrepresentations made on insurance applications.

MIB The MIB is supported by insurance companies and it collects medical information about an applicant's health as reported by insurance companies after underwriting.

After K completed an application for health insurance, a paramedical scheduled an appointment to check height, weight, blood pressure, and collect blood and urine samples. This is an example of which source of underwriting?

Medical Exam

If a premium was not paid at the time of application and a policy is issued, all the following are responsibilities of the agent/producer, except:

Pay the first premium If a premium has not been paid with the application and a policy is issued, the agent is responsible for hand-delivering the policy, explaining the policy, coverages, riders and exclusions, obtaining a signed Statement of Good Health, and collecting (not paying) the first premium.

Which of the following is not an underwriting factor for health insurance?

Place of birth

HIPAA ensures which of the following?

Privacy of health information

Statements made on the application are considered true to the best of the applicant's knowledge and belief are considered to be:

Representations

If a change or correction must be made on the application for insurance, which of the following applies?

The Producer can make the change and have the insured initial the change

Consumers must be made aware of all of the following in a replacement sale, except:

The financial ratings from each rating service Upon issue of a new policy, there may be a new waiting period (probationary period) for pre-existing conditions or the policy may be issued with lower benefits, or with more limitations or exclusions compared to the old policy. Premiums may also be higher in the new policy.

In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what else must the agent obtain to make the delivery complete?

A statement of good health It is the agent's responsibility to deliver the policy and verify that the insured has remained in good health.

Accident and Health Insurance provides coverage for two major categories of perils. They are:

Accidental injury and sickness

Other than the applicant, which signature is required on an application?

Agent

Policy replacement is the process of:

Cancelling an existing policy and issuing a new policy

The prior medical conditions for which the applicant has received, or should have received, medical advice or treatment within a specified period before the effective date of a policy are called:

Pre-Existing Conditions

Which of the following items does not become part of the insurance contract as defined in the entire contract clause?

The agent's report

An application for health insurance includes all of the following information, except:

Attending physician's statement The application includes general questions relating to the applicant (date of birth, gender, residence, marital status, and occupation) and medical questions (past and present health conditions, recent medical visits, procedures, hospitalizations or surgeries, and medical status of immediate family members). The attending physician's statement is separate from the application and is requested by the underwriter if the applicant has a preexisting condition that needs further explanation.

Edward applies for a disability insurance policy. He pays the initial premium at the time of application and receives a conditional receipt. Three days after the insurance company conducts a medical examination, but before it issues a policy, Edward suffers a stroke. Upon reviewing the results of his medical exam, the company discovers that Edward has been diagnosed with high blood pressure and atherosclerosis. Under the terms of the conditional receipt, the insurance company:

Denies the claim because the insurer would not have issued the policy as applied for as standard or better The insurer will deny the claim because they cannot issue the policy as written. If the insurer chooses to issue a policy, it will either be a rated/substandard policy or a standard policy with an exclusion for Edward's medical condition.

A producer gathers information about the applicant for the insurer in order to avoid adverse selection. This is considered to be:

Field underwriting The agent's primary underwriting role is to make sure the application provides proper information for the insurer.

If a policy is issued with a surcharge, this means that the

Policy was issued with a higher premium due to the increased risk If a policy is issued with a surcharge, the insurer assesses an additional premium cost due to an increased risk. Since the policy was issued, the applicant is still considered insurable. The insurer is still required to pay claims and the agent must deliver the policy to collect additional premium, explain the policy and higher rating, and obtain a Statement of Good Health.

The __________ is the person applying for insurance coverage and is responsible for completing an application.

Policyowner

What factors are not used in underwriting an individual disability policy?

Political affiliation and religious preference

Which of the following is required to sign the application for insurance?

Producer and the applicant The producer and the applicant must sign the application. If the applicant and insured are different, then both must sign as well as the producer.

P has had some health issues over the years and is not confident he will qualify for standard issue insurance. If P completes an application and submits it to the insurance company without paying the premium up-front, coverage will take effect

When the policy is delivered to P and the premium is paid An insurance applicant who does not wish to pay the premium up front can still apply for coverage. If the applicant is ultimately considered an acceptable risk, coverage would not take effect until the policy is delivered by the agent and the premium is paid

If the insurer issues a policy after receiving an application for health insurance in which questions regarding preexisting conditions were left blank, what would be the consequence to the insured's coverage if a preexisting condition caused a claim shortly after the policy was issued?

Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank If a policy is issued with questions unanswered, the contract will be interpreted as if the question had not been asked and is therefore waived by the insurer. However, if the insurer can demonstrate that an inadvertent omission is a material concealment, the policy may be voided, because intentional or unintentional concealment allows the insurer to void the policy.

During the underwriting process, an underwriter was alerted that the applicant previously failed a medical exam by testing positive for marijuana while applying for a disability income policy 2 years ago. Which of the following sources provides this type of information to assist member companies when determining the eligibility of an individual risk?

Medical Information Bureau The MIB acts as an information exchange by alerting underwriters to previous claim information, adverse medical information, fraud, errors, omissions, or misrepresentations made on insurance applications. A consumer credit report provides financial information, the Attending Physician's Statement provides information specific to a current medical condition, and a nurse does not report information to other insurance companies.

Which of the following are included in Part II of a Health Insurance Application?

Present health and medical background of applicant and family Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives.

When Harry completed his insurance application, the agent discovered that he was under treatment for a chronic condition. In order to gather the necessary information, Harry's agent ordered a/an:

An attending physician statement An attending physician's statement is ordered when the application reveals the presence of a chronic or other condition for which additional information regarding treatment and prognosis is required. A medical exam is ordered based on a variety of factors including the age, and condition of the applicant as well as the amount of coverage requested. A Medical Information Bureau report will be ordered on all applicants as a matter of course.

All of the following are sources that insurers may look at for information regarding the insurability of a prospective insured, except:

College Degree Underwriters look at the application, credit and inspection reports, MIB data, APS, medical exams and test results, and supplemental questionnaires.

All of the following are examples of insurable interest between the insured and policyowner, except:

College roommates Insurable interest, which must exist at the time of application, is a relationship in which a financial or economic loss would occur if the insured suffers a loss. Of the answers presented, college roommates do not automatically have an insurable interest in each other.

Howard talks to his agent Jane about buying a critical illness policy from the XYZ insurance company to cover his wife Deborah, and naming his daughter Mary as the beneficiary in case of death. Jane told him that she would need signatures from all of the following, except:

Mary Beneficiaries are not required to sign. The agent must sign on behalf of the company, and the insured, not being a minor, must give consent to being insured. The policy owner, who is also the applicant, must by definition sign the application.

If a premium is collected at the time of the application, the producer will issue a:

Conditional receipt The conditional receipt provides coverage at the time of application as long as the coverage is issued. If a loss occurs prior to the issuance of the policy, the insurer would have to prove the policy would not have been issued, or pay the claim.

Which of the following would be considered a pre-existing condition?

Diabetes

An insurance applicant must be notified prior to an insurer ordering an investigative or financial report as required by which law?

Fair Credit Reporting Act

An application for health insurance was submitted on May 1 without a premium payment. The underwriter ordered a medical exam, which was completed on May 15. The company issued and mailed the policy to the agent on May 30. The agent delivered the policy and collected the first premium, along with the Statement of Good Health, on June 3. Coverage became effective on:

June 3

What is the primary source of underwriting information for an individual health insurance policy?

The application

G applies for a policy as a standard risk after paying the initial premium. After thorough underwriting, the insurer issues the policy as a substandard risk. The issued policy represents:

The insurer's counteroffer

The agent's primary underwriting role is:

To make sure the application provides the proper information

An application for health insurance was submitted on November 1 with the initial premium and a conditional receipt was provided. Due to an existing medical condition, the underwriter requested an Attending Physician Statement, medical exam, and MIB report. After reviewing all sources of insurability, the insurer issued the policy as substandard with a surcharge. The policy was delivered by the producer on December 1 after explaining the coverage and surcharge, obtaining the statement of good health, and collecting the premium. Coverage became effective as of the date the:

Agent explained the policy coverage, surcharge, and collected the additional premium Although the initial premium was paid and a conditional receipt was provided, the policy was not issued as applied for; therefore coverage is not effective until the insured accepts to counteroffer and pays the additional premium.