(Health) Chapter 1: Field Underwriting Procedures

*The Medical Information Bureau (MIB) was created to protect* A. Medical examiners that perform insurance physical examinations. B. Insurance companies from adverse selection by high risk persons. C. Insurance departments from lawsuits by policyowners. D. Insureds from unreasonable underwriting requirements by the insurance companies.

*B. Insurance companies from adverse selection by high risk persons.* The MIB makes information available to underwriters to assist them in the underwriting process. It is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

*If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?* A. A legal (but unethical) contract B. Unilateral C. Adhesion D. Conditional

*B. Unilateral* In a unilateral contract, only one of the parties to the contract is legally bound to do anything.

*Which of the following is true about the requirements regarding HIV exams?* A. Prior informed oral consent is required from the applicant. B. HIV exams may not be used as a basis for underwriting. C. The applicant must give prior informed written consent. D. Results may be disclosed to the agent and the underwriter.

*C. The applicant must give prior informed written consent.* A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.

*What is a definition of a unilateral contract?* A. If one party makes a condition, the other party can counteroffer. B. One-sided: only one party makes an enforceable promise C. Two or more parties go into a contract understanding there may be an unequal exchange of value D. One author: the company wrote the contract; the insured must accept it as written.

*B. One-sided: only one party makes an enforceable promise* An insurance contract is unilateral in that only one of the parties to the contract is legally bound to do anything.

*The Federal Fair Credit Reporting Act* A. Regulates consumer reports. B. Protects customer privacy. C. Regulates telemarketing. D. Prevents money laundering.

*A. Regulates consumer reports.* The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.

*What is a material misrepresentation?* A. Concealment B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company C. Any misstatement made by an applicant for insurance D. Any misstatement by the producer

*B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company* A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

*In insurance, an offer is usually made when* A. The agent hands the policy to the policyholder. B. An agent explains a policy to a potential applicant. C. The completed application is submitted. D. The insurer approves the application and receives the initial premium.

*C. The completed application is submitted.* In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

*In forming an insurance contract, when does acceptance usually occur?* A. When an insurer delivers the policy B. When an insurer receives an application C. When an insured submits an application D. When an insurer's underwriter approves coverage

*D. When an insurer's underwriter approves coverage* In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

*Something of value exchanged between the insurer and the insured is considered an* A. Legal capacity. B. Consideration. C. Offer. D. Acceptance.

*B. Consideration.* Consideration is something of value that each party to an insurance contract gives to the other.

*Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information* A. Held in a computer format. B. Held or transmitted in paper form. C. Held or transmitted in any form. D. Transmitted electronically only.

*C. Held or transmitted in any form.* Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information held or transmitted by a covered entity or its business associate in any form or media, whether electronic, paper or oral. This is called protected health information (PHI).

*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?* A. Offer her a secondary policy B. Ask the applicant to sign a statement that acknowledges that the policy had been delivered C. Collect a late payment fee D. Ask her to sign a statement of good health

*D. 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.

*Which of the following entities can legally bind coverage?* A. Federal Insurance Board B. Agent C. Insurer D. The insured

*C. Insurer* Only insurers, not agents, can bind coverage.

*To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested?* A. When the applicant's credit is checked B. When the policy is delivered C. At the initial interview D. At the time of application

*D. At the time of application* A notice to the applicant must be issued to all applicants for health insurance coverage.

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

*D. 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 agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured's family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?* A. The policy will remain in force as long as there are no material misrepresentations on the application. B. The policy is legal since the applicant was able to give all required information. C. The policy is not legal; agents cannot sell insurance over the phone. D. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.

*D. The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.* When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. Because the applicant was confused, it is possible she was suffering from pain or could have been affected by medication, or was having other issues; therefore, if it can be proven that the applicant was incapable of making a buying decision during the application and acceptance process, the policy could be voided.