Chapter 8: Introduction to Health Insurance
There is no coverage until?
A statement of good health and premium are collected at the time of delivery.
what is an agent's report?
An Agent's Report is a personal statement submitted by the producer to the insurer regarding any personal knowledge of the applicant, including information observed during the application process. This information remains confidential between the producer and the insurer, and it does not become part of the entire contract.
If a premium is paid at the time of application and the policy is issued as applied, legal delivery can occur at the time of: A Completed medical exam B Application C Issuance of the policy D When a statement of good health is provided
C. Issuance of the policy **Legal delivery occurs when the policy is issued or accepted by the insurer only if the initial premium has been paid and the policy was issued as applied. It is at this point that a legal contract exists since the issued policy is the acceptance of the offer.
If a premium was not submitted with the application, the producer must deliver the policy, explain the benefits, and collect the premium. The issued policy is the Offer and the premium becomes the: A Evidence B Delivery C Trial D Acceptance
D. Acceptance **The policy is the offer from the insurer to the individual who accepts the policy by paying the premium.
Policy replacement is the process of: A Adding additional coverage B Lowering a policy premium C Changing riders and exclusions D Cancelling an existing policy and issuing a new policy
D. Cancelling an existing policy and issueing a new policy
If a premium is collected at the time of the application, the producer will issue a: A Contestable receipt B Guaranteed receipt C Sales receipt D Conditional receipt
D. 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 documents used for underwriting can be completed by talking to the proposed insured over the phone? A Agent's report B MIB C APS D Inspection report
D. Insection report **The inspection report can be filled out during a conversation with the applicant/insured over the phone. The inspection report consists of an interview with the applicant to confirm and elaborate information submitted on the application. The APS, MIB, and Agent's report are all completed by third parties.
Steps in the policy delivery?
Legal delivery Producer explains rating, premiums, coverages, and policy benefits Statement of Good Health
Steps in the Underwriting process?
MIB report may be requested Classification of risk and rating Insurability is determined
What will the face page of the insurance policy have on it?
Name of the insurance company Name of the insured and policyowner Face amount of the policy Basic description of the type of policy purchased Policy number and anniversary date The insurance company's promise to pay the death benefit (Insuring Clause)
what is the purpose of the MIB? (Medical Information Bureau) Report?
Primarily used to collect adverse medical information about an applicant's health and act as an information exchange. -operates on a non-for-profit basis. -These services "alert" underwriters to previous claim information, fraud, errors, omissions, or misrepresentations made on insurance applications, and the MIB may help lower the cost of life and health insurance for consumers. -the report alone cannot be used to decline an applicant for insurance.
Steps in the application process?
Required signatures Formal request for the insurer to issue a policy Conditional receipt may be issued
what is a conditional receipt?
This receipt provides that coverage will become effective as of either the date of application, or the date of completion of any required medical exam, whichever is later, as long as the policy would have been issued as applied for or better. -assume all based on standard risk
If no initial premium is paid, the application is considered what?
a trial application and no offer exists.
An applicant for accident and health insurance works two jobs. Which of the applicant's jobs will be used to underwrite the policy? A The job in which the applicant has the most experience B The one with the most hours per week C The most hazardous of the two D The least hazardous of the two
C. The most hazardous of the two
what are sources of insurability?
Include the application, medical exam, an attending physician's statement, the medical information bureau (MIB), an inspection report, and the agent's report.
In order for a contract to be vaild an ____________ ____________ must exist between the owner (applicant) and insured before the policy will be issued.
Insurable interest. which exists if the insured's sickness or injury would result in a financial or economic loss by the owner.
what is a trial applicaton?
A trial application is one submitted without a premium. An insurance applicant may be concerned that he/she will not qualify for a policy and does not wish to pay the premium up front. If the applicant is considered an acceptable risk, coverage would not take effect until the policy is ultimately issued by the insurer, delivered by the agent, and the premium is paid. This may also be referred to as a C.O.D., or collect on delivery.
Other than the applicant, which signature is required on an application? A Agent B Insurance commissioner C Beneficiary D Executive officer of the insurer
A. Agent.
All of the following are sources that insurers may look at for information regarding the insurability of a prospective insured, except: A College Degree B Inspection Report C APS (Attending Physician Statement) D MIB (Medical Information Bureau)
A. College Degree
All of the following are potential risks of replacement of an individual health or disability insurance policy, except: A Coverage due to an accident will be restricted for 30 days after the effective date of the policy B Coverage may be reduced or excluded due to a pre-existing condition C Premiums may be higher than the original policy D A new probationary period may go into effect limiting coverage for losses due to sickness
A. Coverage due to an accident will be restricted for 30 days after the effective date of the policy. **Replacement of a policy may result in higher premiums, exclusions due to pre-existing conditions, or a probationary period limiting when losses due to a sickness are covered. Losses due to an accident are not affected by pre-existing conditions or probationary periods.
An insurance applicant must be notified prior to an insurer ordering an investigative or financial report as required by which law? A Fair Credit Reporting Act B Health Insurance Portability and Accountability Act C Freedom of Information Act D USA PATRIOT Act
A. Fair Credit Reporting Act.
Before a policy will be issued, an insurable interest must exist between the owner (applicant) and the A Insured B Producer C Beneficiary D Insurer
A. Insured
A medical or physical exam requested by the underwriter to determine insurability: A Is performed by a licensed professional and includes checking vital statistics and routine lab work B Includes a written statement by the applicant's primary care physician explaining the treatment for a preexisting condition C Is paid for by the applicant up front and reimbursed by the insurance company once the policy is issued D Requires notification of information practices and written consent under the FCRA
A. Is performed by a licensed professional and includes checking vital statistics and routine lab work **A medical exam is paid for by the insurer and does not require written consent under the FCRA. A written statement from the applicant's doctor explaining treatment for a preexisting condition is an attending Physician's statement. The medical exam is completed by usually a registered nurse or a paramedical professional and includes checking vitals, height, weight, and collecting blood and urine samples.
Which one of the following is not a factor when an insurer underwrites a policy? A Marital status B Tobacco use C Gender D Age
A. Marital Status **Marital status is not a factor in the underwriting process. It is not a risk factor that is taken into consideration such as age, gender, occupation, hobbies, height and weight, and health history.
Which party to a health insurance contract is responsible for making the premium payments? A Policyowner B Insured C Beneficiary D Producer
A. Policyowner **By definition, the policyowner is responsible for making all decisions regarding the policy and maintaining the policy by paying the premiums. The insured may also be the owner, but it is not a requirement.
Accident and Health policies provide coverages for all, except: A Workers' Compensation claims B Medical expenses C Dental expenses D Accidental death and dismemberment
A. Worker's Compensation claims **Workers' Compensation is a form of casualty insurance contract, and can only be written with a Property/Casualty license. It is not a disability policy written by Accident and Health insurers.
Underwriting factors may include:
Age Gender Tobacco use Occupation and hobbies (degree of risk); if more than 1 occupation, the most hazardous will be used Physical condition Moral hazard/financial hazard Health history Foreign travel/residence Other insurance Plan applied for
Which one of the following is the primary source of underwriting information? A Medical exam B Application C Investigative consumer report D Attending Physician Statement
B. Application
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: A Upon policy delivery B At the date of application C After the free look expires D At the time the policy is issued
B. At the date of application **The conditional receipt is issued upon the premium being paid at the time of application. If the policy is issued as applied for, coverage is effective as of either the date of application, or the date of completion of any required medical exam, whichever is later. Since the question asks you to assume the medical exam is already complete, the date of application would be the later date.
The insurer's underwriter may find information about an applicant's moral character, hobbies, work and general reputation from a: A Agent's Report B Consumer Investigative Report C Medical Examination D Attending Physician Statement
B. Consumer Investigative Report **A Consumer Investigative Report is a general report of the applicant's finances, character, morals, work, hobbies and other habits. It is sometimes called an Inspection Report.
When it comes to health insurance underwriting and HIV/AIDS, which statement is TRUE? A Refusing to be tested for HIV cannot be the reason for denial of coverage B Insurers can refuse to issue a policy based on HIV test results C All health insurance applicants must be tested for HIV D Insurers cannot require an HIV test in order to consider an application
B. Insurers can refuse to issue a policy based on HIV test results
All of the following are individual underwriting factors, EXCEPT: A Age B Marital Status C Tobacco use D Gender
B. Marital Status
What is the primary source of underwriting information for an individual health insurance policy? A A medical exam B The application C The agent's report D The inspection report
B. The application
If a premium is submitted with the application and a conditional receipt is issued, coverage is effective: A The date the policy is issued and mailed to the producer B The date of application, or date of a completed medical exam if required, whichever is later, as long as the policy would have been issued as applied for C The date the insurance company received the results of a required medical exam D The date the insured or owner signed the policy delivery receipt
B. The date of application, or date of a completed medical exam if required, whichever is later, as long as the policy would have been issued as applied for **A conditional receipt provides that coverage is effective the later of the date the application is signed or when a required medical exam is completed, not when the results are provided.
An application for health insurance includes all of the following information, except: A Medical status of immediate family members B Past and present health conditions C Attending physician's statement D The applicant's age, gender, date of birth, and occupation
C. Attending physician's statement
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: A May 1 B May 15 C June 3 D May 30
C. June 3 **Coverage becomes effective once the premium is paid and the policy is delivered. Since the premium was not paid until June 3, coverage is not effective until the date.
When a policy is mailed to an agent by an insurer after being accepted as applied for and the initial premium paid, it is considered to be: A Rated B Issued C Legally Delivered D Purchased
C. Legally Delivered **A policy may be delivered by registered or certified mail with a signed receipt of delivery. 'Constructive delivery' occurs when the insurer places the policy with the delivery service and no longer has physical custody of the policy.
Which of the following are included in Part II of a Health Insurance Application? A Marital status B Occupation C Present health and medical background of applicant and family D Address
C. Present health and medical background of applicant and family
A specified period that must elapse before new coverage goes into effect for a given condition is known as which of the following? A Waiting period B Exclusion C Probationary period D Benefit period
C. Probationary period **A probationary period is a specified period of time after the effective date of a policy before new coverage goes into effect for specified conditions, such as losses due to a sickness or preexisting conditions.
If an incomplete application is accepted by the underwriter and a policy is issued without requesting the missing information, which of the following statements applies? A The producer will be personally responsible out of pocket for any claims filed based on the missing information in the application B The policy can be contested if a loss occurs within 2 years of the policy being issued C The insurer waives its right to contest a claim based on the incomplete application D The insurer can void the contract at any time since this is considered fraudulent
C. The insurer waives its right to contest a claim based on the incomplete application **If the insurer issues a policy based on an incomplete application, it waives the right to contest a claim based on any missing information.
Which of the following would be considered a pre-existing condition? A A sore throat B The flu C A broken wrist D Diabetes
D. Diabetes
Field underwriting is very important: A Due to the risk of morale hazard B For individual insurance only C For policies that do not require home office underwriting D Due to the risk of a moral hazard
D. Due to the risk of a moral hazard **An agent's personal contact and assessment of an individual or helps to confirm whether the information provided on an application is accurate. The possibility that an applicant might, for his or her own benefit, provide information that does not accurately reflect the level of risk, is considered a moral hazard. A morale hazard refers to indifferent attitude toward being involved in risky behavior while coverage is in force.
All of the following statements regarding an insurance application are correct, except: A It is a formal written request by an applicant to an insurer requesting a policy B It must be signed by at least the applicant and producer C It is the primary source of information for underwriting purposes D It is not included as part of the contract
D. It is not included as part of the contract.
Which of the following sources of insurability alerts members about an insurance applicant's previous claim information? A Consumer Investigative Report B APS C Agent's Report D MIB
D. MIB **The MIB, Medical Information Bureau, Report acts as an information exchange regarding an applicant's previous claims, representations, possible fraud, pre-existing conditions, hazardous hobbies or occupation, and other information that may make the applicant a higher risk.
Producer W filled out an application on client X. Before submitting the application to the insurer, W notices that there was one question left unanswered and another one was answered incorrectly based on the information provided. Since X lives over an hour away from the office, W should do which of the following? A As a licensed professional, W can answer the question and correct any mistakes on behalf of X B Immediately submit the application as is written and hope that the home office does not notice C W can make these necessary administrative changes with X's verbal consent D Make arrangements to meet X in-person to obtain the missing information and correct the incorrect response
D. Make arrangements to meet X in-person to obtain the missing information and correct the incorrect response **The producer does not have the authority to make changes on behalf of the applicant. Changes must be made in the presence of the applicant who must initial the changes.
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? A Attending Physician's Statement B Medical Information Bureau C Completing the application D Medical exam
D. Medical exam **This scenario is an example of using a medical or physical exam to assist in underwriting. An Attending Physician's Statement is a form completed by a physician regarding a current medical condition, and the MIB is a third party that reports information about past insurance the applicant has applied for or owned.
Statements made on the application are considered true to the best of the applicant's knowledge and belief are considered to be: A Waivers B Warranties C Concealments D Representations
D. Representations **Representations are statements made and believed to be true to the best of a person's knowledge. Warranties are statements of absolute truth.
If a premium is not paid at the time of application, the producer will obtain which of the following at the time of policy delivery? A Conditional receipt B Notice of consent C Attending physician's statement D Signed statement of good health
D. Signed statement of good health **If premium is not paid at the time of application, the producer will collect the premium when delivering the policy and obtain a signed statement of good health from the insured stating that there have been no changes to the insured's health since the time of application.
An application for health insurance is completed by a producer and signed by the applicant. The applicant remembers information that needs to be added to the application before being submitted to the insurer and contacts the producer, who has returned to the office. Which of the following statements is correct? A The producer can make any changes necessary with verbal consent of the applicant B Once the application is signed, answers reported on the application cannot be changed C The applicant will have the opportunity to correct any information when the policy is delivered D The producer must meet with the applicant in person to update the information and have the applicant initial the changes
D. The producer must meet with the applicant in person to update the information and have the applicant initial the changes **Changes can only be made to an application with written consent of the applicant by initialing the changes or updates.
The agent's primary underwriting role is: A To determine insurability B No longer applicable in most situations C To collect information for marketing purposes D To make sure the application provides the proper information
D. To make sure the application provides the proper information **An agent does not determine insurability, but an agent does make sure the application accurately reflects the real nature of the risk.
what is a probationary period?
a specified period of time such as 60 days after the policy effective date, before losses due to sickness are covered. This waiting period is designed to protect the insurer from an insured purchasing a policy with the intent to immediately file a claim.
Legal delivery:
acceptance of a legal contract.
A sickness is defined as:
an illness or disease that occurs after the policy is issued.
The _______________ is the primary source of info used for underwriting a potential risk. If attached to the policy, a copy of the _______________ becomes part of the entire contract.
application
Replacement terms?
canceling an old policy upon the purchase of a new policy. The old policy should not be canceled before the new policy is issued; otherwise, this could leave the applicant without coverage. The replacement of a policy puts the insured at risk for higher premiums or no initial coverage due to a pre-existing condition. The new policy may require underwriting to prove evidence of insurability, which can affect the coverage and premiums of the new policy. Also, a new probationary period would apply, limiting coverage for losses due to sickness during a specified period of time.
health insurance protects against?
consumers for certain losses due to covered sickness and/or accidents.
Health insurance benefits may include payments for:
disability income, medical, hospital and surgical expense reimbursement, dental expenses, accidental death and dismemberment, and long-term care expenses
why is field underwriting important?
due to risk of a moral hazard. It is the initial step of the total process of insuring a health risk.
what is an Inspection/Investigative report?
general report of the applicant's finances, character, morals, work, hobbies, and other habits. This is sometimes referred to as a Consumer Investigative Report.
underwriting is the process of:
selection, classification, and rating. The process of determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged.
Accidental bodily injury is defined as?
spontaneous, unforeseen, and unintended event resulting in injury.
The policy will not go into effect until when?
the first premium has been paid. needs to be signed.
what is the general purpose of underwriting?
to detect for adverse selection, unhealthy or high risk applicants, and to insure only those risks that meet certain criteria.