Chapter 3
1. Which of the following is a primary purpose of a Medical Information Bureau (MIB) report? 1. Allows insurer to avoid high risk applicants 2. Allows insurer to receive medical history from applicant's personal physician 3. Allows insurer to deny claims for pre-existing illnesses 4. Allows insurer to reduce death claim amounts
1. Allows insurer to avoid high risk applicants
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: 1. The applicant has the right to obtain the substance of the information in the consumer report from the reporting agency 2. The reporting agency may not disclose old negative information that predates the report by more than seven years 3. Bankruptcies may be reported for up to a ten year period 4. The applicant has the right to secure the information in the report directly from the insurance company
4. The applicant has the right to secure the information in the report directly from the insurance company
Which of the following receipts provides coverage for an insured immediately upon the payment of the premium? 1. Binding receipt 2. Approval receipt 3. Conditional receipt 4. Insurability receipt
1. Binding 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: 1. When the policy is issued 2. As of the date the application is approved by underwriting 3. When the policy is delivered 4. As of the date of receipt if the application is approved
4. As of the date of receipt if the application is approved
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: 1. Substandard risks are never insurable 2. Place the application in a high risk pool 3. Require insurability each year 4. Charge a higher premium
4. Charge a higher premium
Each of the following are important life or health insurance underwriting factors, EXCEPT: 1. Consumer report 2. Medical history 3. The agent's report 4. The initial premium
4. The initial premium
Which of the following is not a responsibility of a field underwriter? 1. Issue a policy 2. Complete applications 3. Collect premium 4. Provide a premium receipt to an applicant
1. Issue a policy
Applications for coverage are usually accompanied by an initial premium. An applicant who submits an application to the insurer without an initial premium has: 1. Made an invitation 2. Made an offer 3. Offered an acceptance 4. Accepted an offer
1. Made an invitation
Which of the following risk classifications is characterized by a lower annual premium? 1. Preferred risk 2. Substandard risk 3. Standard risk 4. Personal risk
1. Preferred risk
A home office underwriter receives the greatest amount of insurability information from which of the following sources? 1. The insurance application 2. The medical information report 3. An attending physician's statement 4. A consumer report
1. The insurance application
1. Which of the following is provided to an applicant when a premium is collected along with an application for life insurance? 1. A producer or agent's report 2. A conditional receipt 3. The entire contract 4. A ten-day free look
2. A conditional receipt
Each of the following factors is of primary importance when underwriting life or health insurance, EXCEPT: 1. The occupation of the proposed insured 2. Medical history of the proposed insured 3. The marital status of the proposed insured 4. The age and sex of the proposed insured
3. The marital status of the proposed insured
1. Insurers utilize several sources of information in order to make underwriting decisions. Each of the following are important underwriting factors, EXCEPT: 1. The application information 2. Health history of the proposed insured 3. The agent's statement or report 4. The initial premium paid
4. The initial premium paid
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? 1. To avoid adverse selection 2. To increase persistency 3. To provide incentives for its sales force 4. To write a larger share of the market
1. To avoid adverse selection
An agent fills out an application but neglects to list the beneficiary designation. What will the insurer do when it receives the incomplete application? 1. Underwrite the application 2. Return the application to the agent 3. Issue the policy 4. Deposit the initial premium
2. Return the application to the agent
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? 1. Decline the application 2. Issue a standard policy 3. Accept the risk and charge an extra premium 4. Accept the risk and increase the number of exclusions
3. Accept the risk and charge an extra premium
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? 1. Remit greater commissions 2. Increase production 3. Avoid adverse selection 4. Increase persistency
3. Avoid adverse selection
The primary purpose of the Medical Information Bureau (MIB) is to: 1. Assist medical professionals 2. Prevent over insurance 3. Discover misrepresentation and fraud 4. Provide detailed medical information to a physician
3. Discover misrepresentation and fraud
1. Jack wishes to buy life insurance on his eighteen year old son. Who must sign the application? 1. Jack 2. His son 3. Jack and his son 4. Neither
3. Jack and his son