Health Chapter 1 : Field Underwriting Procedures

Pre-existing condition

A medical condition for which the insured sought medical advice or treatment within a specified period of time prior to the policy issue.

Consumer Reports

Include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Parties to a contract (Competent Parties)

Must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

Acceptance (Agreement)

Takes place when an insurer's underwriter approves the application and issues a policy.

4 requirements for forming a legal binding contract

1. Agreement, 2. Consideration, 3. Competent Parties, 4. Legal purpose

Representations

Are statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true.

Material misrepresentation

Is a statement that, if discovered, would alter the underwriting decision of the insurance company. If they are intentional, they are considered fraud.

Warranty

Is an absolutely true statement upon which the validity of the insurance policy depends.

Adhesion contract

Is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). In other words, insurance contracts are offered on a "take-it-or-leave-it" basis by an insurer.

Consideration

Is something of value that each party gives to the other. The binding force in a contract.

Medical Information Bureau (MIB)

Owned by insurers and it is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

Conditional contract

Requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

Unilateral contract

Requires that only one of the parties to the contract is legally bound to do anything.

Investigative Consumer Reports

Similar to Consumer Reports except the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

Fair Credit Reporting Act

The act established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. The law also protects consumers against the circulation of inaccurate or obsolete information.

Legal Purpose

The purpose of the contract must be legal and not against public policy. To ensure legal purpose of a Life Insurance policy, for example, it must have both: insurable interest and consent .

Misrepresentations

Untrue statements on the application that could void the contract.