LOMA 291 Module 2

material misrepresentation

A statement made in an application for insurance that is not true and that caused the insurer to enter into a contract it would not have agreed to if it had known the truth.

Omnichannel distribution

A form of distribution that enables personalized sales to customers through multiple, integrated communication channels.

Operational metrics

A measure of how effective and efficient a process is; examples include service level, schedule adherence, average speed of answer, or average handling time.

Motor vehicle record

A report that contains information about a person's driving history, including information about traffic violations, arrests, and convictions

Complaint Team

A work group dedicated to resolving customer complaints. Also known as a problem resolution team.

underwriting components

Assessing risk Classifying risk Making underwriting decision

Net Promotor Score a. Operational metric b. Service metric

B.

Renewal commission rates are higher than the first-year commission rate. a. True b. False

B. - Renewal commission rates are generally lower than the first-year commission rate—usually 2 to 5 percent of premiums received—and they are paid only on policies that remain in force.

processing policy changes

CSRs process policy changes over the phone, send the policyowner a form to complete, or direct the policyowner to a website for a self-service change. With all contact methods, the policyowner would supply the same information to the company.

direct sales force

Financial professionals directed by an insurer who distribute the insurer's products.

Customer Experience (Cx)

The impression of a company that a customer forms over time as the result of a series of encounters with the company.

rescission

The legal process of voiding an insurance contract because of material misrepresentation in the insurance application.

touchpoint

contact that a customer has with a company.

retention rates

customer retention: The ratio of business remaining with an insurer through a specific period of time. lapse rate: The ratio of business that terminates during a specified period for nonpayment of premium, whether by surrender or lapse, to the total business in force at the beginning of the period.

how a claim should be paid.

first primary beneficiary second contingent beneficiary third policy owner fourth policy owners estate

factor table

A chart that shows the maximum amount of insurance—expressed in multiples of a person's salary or current gross earned income.

Although verifying proof of loss is routine in most cases, a claim analyst would typically conduct further investigation in some situations. Identify whether the analyst would investigate further in each situation described below. The insured was the only one aboard a boat that sank in calm waters 100 feet from shore, and the insured's body was not recovered. A. Investigate further B. Approve the claim

A. - The boat sinking under these circumstances cannot reasonably account for the disappearance of the insured.

From January 1 to December 31, Forthright Financial had a customer retention rate of 90 percent. This means that the lapse rate was 10 percent 90 percent

A. - The lapse rate was 10 percent. A company's lapse rate plus its customer retention rate equals 100 percent. This means that if a company's customer retention rate is 90 percent, its lapse rate would be 10 percent (100 - 90).

Insurable interest

Aa requirement for insurance coverage that exists when a person is likely to suffer a genuine financial loss or detriment if the event insured against occurs

Multiple-line exclusive agents (MLEAs)

An agent who sells life insurance, health insurance, annuities, and property-casualty products for one insurance company, with the majority of sales being property-casualty products.

service fee

An amount—typically a small percentage of premiums payable after renewal commissions have ceased—paid to an agent currently providing service to a life insurance policyowner.

Financial underwriting

An assessment of a proposed insured's financial condition to determine whether (1) the proposed insured needs the coverage applied for, (2) a reasonable relationship exists between the need for the coverage and the amount of coverage applied for, and (3) the applicant can afford the coverage. Sometimes, an underwriter also may need An inspection report Tax documents A financial questionnaire Financial statements

phishing

An attempt by a criminal posing as a trusted source to contact a target and trick the person into revealing sensitive information.

data breaches

An incident where information is taken from a computer system without the knowledge or authorization of the system's owner; stolen data may be confidential information such as customer data, credit card numbers, or trade secrets. Cybersecurity best practices, including on how to recognize social engineering or malware attacks Customer verification requirements, such as multifaceted authentication Rules governing the handling of customers' personally identifiable information (PII)

Independent agents

An insurance agent whose activities are not dictated by a single insurance company.

Customer Contact Center

An organizational unit within an insurance company that provides customers with a variety of channels—such as telephone, email, web chat, social media, and traditional mail—for communicating with the company. Also known as a customer care center.

A 38 year old applying for $200,000 of life insurance. a. Medical b. Nonmedical c. Paramedical + Urine specimen

B,

Journey maps follow real customers. a. True b. False

B. - Journey maps follow the journeys of customer personas, not actual customers. The customer persona represents a large group of customers, so using a persona when journey mapping would better predict the experience of that group than using the specific experience of an individual customer.

A 44 year old applying for $1,000,000 of life insurance. a. Paramedical + Blood profile + Urine specimen + ECG b. Nonmedical C. Paramedical + Blood profile + Urine specimen

C.

The process of determining whether a particular insurance or annuity product is an appropriate purchase for an applicant based on the applicants needs and financial condition is known as A. New business B. Underwriting C. Checking suitability

C. - A product's appropriateness for a customer is its suitability.

active voice of the customer data

Feedback that the company has solicited from customers, such as responses to survey questions regarding interactions with the company.

Face to Face

Financial professionals commonly meet face-to-face with potential customers, often referred to as prospects. Financial professionals follow a fairly typical sales process during a series of meetings. During these face-to-face meetings, the financial professional: Identifies the prospect's financial needs Develops a proposal that recommends one or more insurance products to meet the identified needs Presents the proposal to the prospect in hopes of completing a sale If the sale is successful, assists the customer in applying for the product, submits the application to the insurer, and, in some instances, delivers the policy to the customer

Voluntary Benefits

Individual or group insurance or other financial products offered through an employer, but paid for by the covered employee, usually through payroll deduction.

Phone

Insurers and financial professionals can use telephones to share information with customers and prospects. Sometimes, the customer will initiate the contact...

Medical Risk Factors

Medical risk factors are physical or psychological characteristics that may increase a person's mortality risk, including Build (body form or shape) Age Sex Personal medical history Family medical history

group representatives

Salaried insurance company employees specifically trained in the techniques of marketing and servicing group products.

Similarities between PPGAs and brokers:

Sell more than one insurer's products Typically are experienced financial professionals Are largely responsible for their own office space and other expenses Require little training other than on specific products

productivity

The effectiveness of productive effort as measured in terms of the rate of output per unit of input.

Life insurance underwriters determine how much certain risk factors, also known as risk characteristics, affect a proposed insured's mortality risk

The three main categories of risk factors are Medical Personal Financial

misrepresentation

Untrue information or information that is not disclosed.

numerical rating system

risk classification method in which a number—a numerical rating—is assigned to an individual proposed insured according to the degree of risk he represents to the insurer; the underwriter then places the proposed insured in a risk class according to the numerical value. The system has three basic steps: Start with a base of 100 (standard mortality) Assign a positive number (a debit) for each risk factor that has been determined statistically to increase a person's mortality risk Assign a negative number (a credit) for each risk factor that has been determined statistically to have a favorable effect on mortality

cost

some insurance distribution systems are more expensive than others. examples: A direct sales distribution system using a career agent channel is the most expensive to establish and maintain because insurers usually pay compensation for sales, employee benefits, field office expenses, recruiting, training, and licensing. Although staffing and training costs are typically much lower for D2C distribution channels than for other distribution channels, they often require a substantial up-front investment in the form of technology, staff training, and the development of sales materials. Intermediary distribution systems can reduce the costs associated with training and staffing.

Personal Risk Factors

Personal risk factors are lifestyle choices that can significantly affect a person's health or longevity.

Customer service representatives preform the following activities

Process policy changes Administer financial transactions that relate to policies and policy values Engage in conserving, up-selling, and cross-selling in some companies Handle complaints Detect and prevent fraud

personas

A fictional prototype of a real-life customer belonging to a certain market segment and having certain needs and interests.

Broker- Dealers

A financial institution that buys and sells securities either for itself or for its customers.

persistency

The retention of business that occurs when an insurance policy remains in force as a result of the continued payment of the policy's renewal premium

account takeover fraud

A form of identity theft in which a fraudster gains access, usually through a data breach, to a victim's accounts and uses them to make unauthorized transactions.

Financial Consultants

A full-time bank employee whose primary function is to sell investment products to bank customers.

customer satisfaction score (CSAT)

A measure of a customer's satisfaction with services received from a company, expressed as a percentage.

Churning

A prohibited sales practice that occurs when a financial professional induces a client to replace one policy after another, multiple times, so that the financial professional can earn a series of first-year commissions on the replacements.

Common ways to engage with customers

- Face to Face - Phone - Direct Mail or Email - Online - Print and Broadcast Media - Worksite Marketing - Location Selling

twisting

A prohibited sales practice that occurs when a financial professional misrepresents the features of a policy to induce the customer to replace an existing policy.

Example Assume that Mr. Acworth's death was ruled accidental and that the following information applies in his situation:

$100,000 face amount of policy $50,000 accidental death benefit $1,000 policy loan outstanding $50 accrued policy loan interest $500 accumulated policy dividends The correct benefit amount payable for this policy would be $149,450. $100,000 + $50,000 + $500 - $1,000 - $50 = $149,450

Channel cannibalism

A situation that occurs when sales from a new distribution channel displace sales from an existing distribution channel.

Reg BI imposes four obligations:

- Disclosure: The financial professional must make a full and fair disclosure of all material facts at the time of an investment recommendation. Disclosure includes facts about the recommendation, any conflicts of interest associated with a recommendation, and the scope of the relationship between the retail customer and the financial professional. - Care: The financial professional must act with reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with a recommendation, and to consider those factors in light of the customer's investment profile in making recommendations that are in the customer's best interest, and that do not put the financial professional's interests ahead of the customer's interest. Although costs are expressly required in evaluating recommendations, the financial professional is not required to recommend the lowest cost option. - Conflict of Interest: The financial institution must establish, maintain, and enforce policies and procedures reasonably designed to mitigate (and in some cases, eliminate) identified conflicts of interest, such as sales contests, that create incentives to make recommendations that are not in the retail customer's best interest. - Compliance: The financial institution must establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

Red Flags for Senior Financial Exploitation

- Moving into a family member's home or having a family member move into the client's home - Moving into a nursing home or assisted living facility or receiving in-home care from a professional caregiver - Suddenly beginning a new romantic relationship or other close relationship with a previously unknown individual - Granting or inquiring about granting a third party the authority to make financial decisions or access assets held in an account or insurance contract - Granting a third party legal authority over the client's affairs

Characteristics of Effective Customer Service

- Prompt: Service is delivered to the customer in a timely manner - Complete: Every Aspect of the problem or inquiry is resolved to the customer's satisfaction - Accurate: The CSR is knowledgeable about the company's products and procedures and can provide the customer with accurate information - Courteous: The CSR is polite, tactful, and attentive to the customer's feelings and situation - Confidential: Only authorized customers can access and view information and preform transactions - Convenient: Customers can get the services they need when, where, and how they want to.

What factors can affect suitability for annuities

- age - income - liquidity - Risk Tolerance

Qualitative performance measurements

- customer satisfaction survey: A survey designed to help a company determine whether its products, services, and prices, are meeting customer expectations. - monitoring: A process used to review and evaluate the quality of customer service interactions either as they happen or after the fact. - service gaps: The condition that exists when the perceived quality of a company's service is lower than customers' expectations regarding the service. - Mystery shoppers: A trained evaluator that contacts customer service representatives and pretends to be a customer.

The new business process components

- data entry - good order check - suitability or best interest check - insurer's records searched for information about applicant and insured - underwriting - policy issue

claim form steps

- step 1 : are benefits payable - step 2 : what amount is payable - Step 3: who is the proper payee - step 4 : How are proceeds to be paid

Forthright has been contracting a large number of new agents, and many of them leave the company after a short period. Why is this high turnover rate a problem? Choose all that apply. a. Forthright does not recover its initial investment in the agents. b. Forthright has to spend additional money to recruit and train replacements. c. Customers are likely to file more claims for policy benefits.

A & B- Insurers spend a lot of money on new agents and expect to get it back from the premiums the agents bring in. When agents leave after only a couple of years or so, insurers lose their investment in the departing agents. Plus, they must recruit and train new agents to replace the departing ones.

A policy replacement via a Section 1035 exchange is permissible for the exchange of (choose all that apply) A. A life insurance policy for an annuity B. An annuity for a life insurance policy C. A policy insuring one life for a policy insuring two lives D. One life insurance policy for another life insurance policy where both policies insure the same person and have the same owner

A & D - Section 1035 exchanges are allowed for the exchange of (1) one life policy for another if both policies insure the same person and have the same owner, (2) a life policy for an annuity, and (3) one annuity for another if benefits are payable to the same person. They're not allowed for the exchange of (1) an annuity for a life policy or (2) a policy insuring one life for a policy insuring two lives.

Regulation Best Interest (Reg BI)

A Securities and Exchange Commission (SEC) package of rules and interpretations, effective June 30, 2020, designed to enhance the quality and transparency of retail investors' relationships with investment advisers and broker-dealers. Also known as Reg BI.

Platform Employees

A bank employee whose primary function is to handle customer service issues and sell traditional bank products such as checking and savings accounts, but who is also licensed to sell insurance.

Customer experience management (CEM)

A business strategy through which an organization manages all aspects of its interactions with current and potential customers. The strategy seeks to optimize the customer's interactions at every stage of the customer journey, including Shopping (recognizing a need, researching companies and products, comparing, getting a quote) Purchase (applying for and purchasing the policy) In-Force (maintaining, refining, and reviewing the policy) Claims (filing a claim, approval, payment)

Policy Exclusions

A claim analyst next determines whether the policy covers the loss. One reason it may not is a policy exclusion, such as the suicide exclusion. When an insured person dies during the suicide exclusion period, the claim analyst determines whether the cause of death was suicide. If the insurer can prove it was, it refunds the premiums paid, less any outstanding policy loans. Sometimes when completing an application for insurance, the applicant gives false information or leaves out important information. If such a misrepresentation is important to the insurer's evaluation of the risk, it's called a material misrepresentation. Most misrepresentations are minor—the applicant states that the insured broke his left arm, when actually it was the right arm. Here are some examples of material misrepresentation.

Renewal commission

A commission paid on policies every year for a certain number of years after the first policy year. Renewal commissions are paid to the person who sold the policy.

First-year commission

A commission paid to the agent who sells a life insurance policy that is equal to a state percentage of the amount of premium the insurer receives during the first policy year.

Internal Customers

A company employee or department that receives support from another employee or department within the organization.

agent

A company employee or independent contractor who is authorized to act on behalf of an insurance company in selling insurance products.

salaried sales representatives

A company employee who is paid a salary for making insurance sales and providing sales support.

seamless process

A customer service process designed so that a customer is not inconvenienced by—or even aware of—the steps involved in fulfilling the customer's request.

social engineering

A cybercriminal's attempts to trick people into revealing confidential information.

Direct distribution system

A distribution system in which the insurance company owns the distribution system and communicates directly with the customer.

claim form

A document containing information about a loss under an insurance policy that is submitted to an insurer to begin the claim evaluation process. Also known as a claimant's statement.

age and amounts requirements chart

A document for an insurance product that specifies the kinds of information needed to assess the insurability of a proposed insured for coverage under that product. Also known as a table of underwriting requirements.

death certificate

A document that attests to the death of a person and bears the signature—and sometimes the seal—of an official authorized to issue such a certificate.

paramedical report

A document that contains (1) a proposed insured's answers to medical history questions recorded by a paramedical examiner and (2) the results of an examination that a paramedical examiner conducts.

Non medical supplement

A document that contains the medical history provided by the applicant, with or without the participation of a financial professional or teleunderwriter.

Extra-percentage table

A document that presents the total mortality for each substandard group and that lists all the tables used in the table rating method.

special investigative unit (SIU)

A group of individuals who are responsible for detecting, investigating, and resolving claims, particularly those involving insurance fraud; often composed of representatives of the claim, legal, and internal audit functions as well as independent investigators.

Advanced underwriting

A group of specialists who will assist in preparing proposals, and will accompany the agent, if requested, to sales presentations on how to use insurance products in a financial plan or in estate planning.

Best interest standard

A legal requirement that recommendations must only consider the consumer's interest and not the interests of the financial institution or financial professional.

suicide exclusion

A life insurance policy provision that typically states that, if the insured dies as a result of suicide within a certain period—usually one or two years from the date the policy was issued, the insurance company does not have to pay the policy proceeds.

Examples of Claim Fraud

A man purchases life insurance on several homeless men, names himself as beneficiary, and then receives the policy proceeds after the insureds die. A claim analyst issues claim checks for the death benefits on life policies covering two nonexistent children. She invents police reports, doctors' reports, and even autopsy reports supporting the claims. A life insurance applicant pays a healthier person to take his medical examination so the applicant will be accepted by the insurer. A claim analyst approves a claim for life insurance benefits on a friend's mother, even though he knows the mother is still alive. A beneficiary claims that the insured died as a result of an accident in an attempt to receive the policy's accidental death benefit, even though the insured died of natural causes.

A Field underwriting manual

A manual that guides a financial professional in (1) assessing the risks a proposed insured represents and in (2) assembling and submitting the application and any required evidence of insurability.

net promoter score

A measure of customer loyalty that asks customers to rank their likelihood to recommend a company or product on a scale of 1-10 and then subtracts the percentage of "detractors" (customers who ranked their likelihood to recommend as 0 - 6) from the percentage of "promoters" (customers who ranked their likelihood to recommend as 9 or 10).

service metrics

A measure of how happy customers are with the service a company provides; examples include Customer satisfaction score (CSAT) and Net Promoter Score (NPS).

Teleunderwriting

A method by which a home office employee or a vendor gathers most or all of the information needed for underwriting during a telephone or videochat interview.

Location selling system

A method for distributing insurance products that is designed to generate customer-initiated sales at an office or information kiosk in a store, shopping mall, or other non-insurance business establishment.

Worksite Marketing definition

A method for distributing voluntary benefits to people at their place of work.

Financial Industry Regulatory Authority (FINRA)

A nongovernmental self-regulatory organization empowered by the SEC to license, investigate, and regulate securities dealers and their representatives.

metrics

A numerical measure that quantifies the performance of a specified activity. Successfully implemented metrics Provide focus for the company, department, or employee Help company leaders make important decisions Identify ways to improve the performance of the company and its employees

trail commision

A percentage of an annuity's accumulated value paid periodically, usually annually, to the financial professional that sold the annuity.

External Customer

A person or organization outside a company who benefits from or might potentially benefit from the company's products or services.

employee benefits broker

A person or organization which helps its employer clients assess the benefit needs of their workforce and design, implement, and administer benefit programs to meet those needs. Also known as employee benefits consultant.

Registered Representatives

A person registered with FINRA who works for a broker-dealer selling securities.

Wholesalers

A person whose job it is to promote the insurer's products to intermediaries and provide them with marketing support.

Customer Service Representative

A person whose primary job responsibility is to support external customers through face-to-face communications or through communications media, such as the telephone, fax, email, or internet chat sessions.

Prospects

A potential customer for an insurer's products or services.

Benchmarking

A process by which a company compares its own performance, products, or services with those of other organizations that are recognized as the best in a particular category in order to identify areas for organizational improvement. Identifying the best outcomes that other companies have achieved for an activity or process Determining what practices produced those outcomes Implementing the best practices to equal or surpass the best outcomes - often conducted by third parties

performance measurement

A process through which a company (1) decides what activities are key to the achievement of the company's goals and objectives, how to measure the performance of those activities, and what performance standards it hopes to achieve; (2) gathers the measurements; and (3) communicates the results. Decides what activities are key to the achievement of the company's goals and objectives Decides how to measure the performance of those activities Decides what performance standards it hopes to achieve Gathers the measurements Communicates the results

Insurance broker-dealer

A registered subsidiary of an insurance company created by the insurer so that its agents who are properly licensed can sell the insurer's variable products. Also known as an insurance-owned broker-dealer.

Medical Report

A report that contains a proposed insured's answers to medical history questions recorded by a physician and the results of a medical examination of the proposed insured that is conducted by a physician.

chatbot

A robotic agent that recognizes and interprets human language and provides information in an internet chat window.

Up-selling

A sales activity in which a customer is invited to purchase an enhanced or more powerful product than the product the customer already owns or is considering purchasing.

rebating

A sales practice, prohibited in most jurisdictions, in which an insurance financial professional offers a prospect an inducement, such as a cash payment, to purchase a life insurance policy or an annuity contract, and the inducement is not offered to all applicants in similar situations and is not stated in the policy itself.

Agent's Statement

A section included in most individual life insurance applications in which the financial professional submitting the application can comment on any factors relevant to the case that might affect the underwriting decision.

retained asset account (RAA) option

A settlement option that allows an insurer to pay a life insurance policy's proceeds into an interest-bearing account in the payee's name; the payee can then withdraw all or part of the proceeds at any time.

Fixed period option

A settlement option under which an insurance company agrees to pay policy proceeds in equal installments for a specified period of time.

Life income option

A settlement option under which an insurance company agrees to pay policy proceeds in periodic installments over the payee's lifetime.

fixed-amount option

A settlement option under which an insurance company agrees to pay the policy proceeds to the payee in equal installments of a stated amount until the policy proceeds, plus interest earned, are exhausted.

interest option.

A settlement option under which an insurance company invests policy proceeds and periodically pays interest on those proceeds.

claim philosophy

A statement of the principles the insurer will follow when conducting claim administration.

omnichannel service

A strategy to seamlessly provide a similar, high-quality experience across multiple communication platforms, including the telephone, internet, mobile, social media, and even in person.

accidental death benefit

A supplementary life insurance policy benefit under which the insurer pays an amount of money in addition to the basic death benefit if the insured dies as a result of an accident.

Intermediary distribution system

A system in which the insurance company relies on external individuals and organizations to connect with the customer.

risk classification system

A system used by underwriters to assign new business cases to risk classes and an associated rate table in a manner that reflects the expected cost of benefits for the insurance product. Also known as an underwriting classification system.

Electronic Application system

A technology that provides an applicant, working alone or with a financial professional, an interface to record and submit insurance application information using their computer or mobile device.

predictive analytics

A type of data analytics that determines the probable future outcome of an event or the likelihood of a situation occurring.

Inspection report

A type of investigative consumer report that a consumer reporting agency prepares about a proposed insured.

Estate Planning

A type of planning in which a financial professional helps a potential customer to develop a program that will cover the customer's current and future financial needs and will provide a means of conserving, as much as possible, the personal assets the person wants to pass on to her heirs at her death.

Accelerated Underwriting

A type of underwriting in which insurers offer coverage to applicants more quickly by reducing the use of medical/lab tests.

Simplified Underwriting

A type of underwriting in which only a few key risk factors are considered in assessing and classifying risk.

Automated Underwriting

A type of underwriting in which technology performs some or all of the steps needed to assess and classify insurance risks.

customer journey maps

A visual depiction of customers' typical touchpoints with a company throughout their customer journeys that matches each touchpoint with the possible communication channels through which customers might experience each touchpoint.

agency contract

A written agreement that outlines the agent's role and responsibilities and the agent's compensation.

power of attorney

A written document that authorizes someone to act as a person's agent in fact and to make certain decisions on the person's behalf.

underwriter

An insurance company employee who (1) evaluates the degree of risk represented by a proposed insured or group with respect to a specific insurance product, (2) accepts or declines insurance applications, and (3) determines the appropriate premium rate to charge acceptable risks.

Select all the benefits of using teleunderwriting. A . No unanswered questions B. No incomplete answers C. No need to complete application

A, & B. - Teleunderwriters are specially trained to ensure that all application questions are answered completely. However, an application still needs to be completed

A universal life policyowner can't pay a due premium. The CSR tells him he can reduce the amount of future premium payments by reducing the policy's face amount. Or, the customer can avoid future payments but continue coverage by using the policy's net cash surrender value to buy either reduced paid-up insurance or extended term insurance. A. Conserving B. Up-selling C. Cross-selling

A. - Here the CSR engaged in conserving the policy because she attempted to keep it in force.

The policyowner wants to surrender his policy and use the policy's cash value for some other purpose than insurance. The CSR points out that the policyowner can get funds and continue the coverage by taking out a policy loan. If the policy is universal life, the CSR points out that the policyowner may withdraw part of the policy's cash value under the policy withdrawal feature. A. Conserving B. Up-selling C. Cross-selling

A. - Here the CSR engaged in conserving the policy because she attempted to keep it in force.

Michelle Bloom submits an online application for $50,000 of life insurance on the insurer's website. The insurer's system automatically searches a variety of databases to obtain information such as a credit report, pharmacy report, and motor vehicle history, among others. The system applies a set of rules to this information and determines that the application meets the criteria for automatic acceptance and does not need to be referred to a human underwriter. Ms. Bloom pays the initial premium with her credit card, and the system emails her a copy of her in-force policy. Which of the following does this scenario illustrate? Choose all that apply. A. Straight-through processing B. Instant issue underwriting C. Exception-based underwriting

A, B, & C - This situation is an example of straight-through processing, in which every step of the new business cycle is processed electronically, without manual intervention. It is also an example of instant issue underwriting, in which technology automatically assesses the risk presented by an application and renders an instant underwriting decision. Finally, in this situation, the insurer's system practices exception-based underwriting by applying a set of business rules to the application data. The system accepts the application because it meets the criteria embedded in the business rules. If the application had not met one or more of the business rules—if it had been an exception to the rules—it would have been referred to an underwriter for further evaluation.

Can you recognize the examples of unfair claim practices? Choose all that apply. a. Failing to promptly acknowledge receipt of claim-related communications B. Indicating the coverage under which each payment is being made C. Insisting on a reasonable claim investigation before affirming or denying a claim d. Attempting to settle claims based on an application that was materially altered without the policyowners' knowledge e. Requiring a proof of loss form as well as subsequent verification that duplicates the original proof of loss

A, D, & E -

In order to assess a proposed insured's personal risk factors, an underwriter may review the following documents (choose all that apply): a. Inspection report b. Military questionnaire c. High school transcript d. Motor vehicle record

A, b, & D

A 62 year old applying for $500,000 of insurance. a. Paramedical + Blood profile + Urine specimen + ECG b. Nonmedical c. Paramedical + Blood profile + Urine specimen + ECG + Cognitive function test

A.

Aa requirement for insurance coverage that exists when a person is likely to suffer a genuine financial loss or detriment if the event insured against occurs a. True b. False

A.

Accuracy a. Operational metric b. Service metric

A.

Quality rate a. Operational metric b. Service metric

A.

Toby Barnard was analyzing a claim submitted during the policy's contestable period. He found out that the insured had not reported that he'd had a heart attack 18 months prior to policy issue. Had this information been known, the insurer wouldn't have issued the policy. The cause of death was cancer. Toby was most likely able to deny the claim and rescind the policy due to material misrepresentation in the application. a. True b. False

A. - A material misrepresentation is untrue information or a fact that is not disclosed that induces the other party to enter into a contract that it would not have entered into as written had it known the truth. In many jurisdictions, an insurer can rescind a policy even if the cause of the insured's death isn't related to the misrepresented information. Because the insurer wouldn't have issued the policy if Toby had disclosed his heart attack, the misrepresentation is a material misrepresentation. The insurer can rescind the policy.

Dash works for a broker-dealer and sells securities. Dash is a a. Registered representative b. Financial consultant c. Wholesaler d. Broker

A. - An individual who is employed by a broker-dealer to sell securities and is appropriately registered with FINRA is known as a registered representative (registered rep).

Having customers rate customer service after a call to the contact center a. Active b. Passive

A. - An insurance company is collecting active VOC data when customers rate their service after calling the company. This is active VOC data because the company is directly soliciting feedback from customers.

Average speed of answer a. Operational metric b. Service metric

A. - An operational metric is a measure of how effective and efficient a process is, and a service metric a measure of how happy customers are with the service a company provides.

Although verifying proof of loss is routine in most cases, a claim analyst would typically conduct further investigation in some situations. Identify whether the analyst would investigate further in each situation described below. The insured died outside of the country in which the policy was issued. A. Investigate further B. Approve the claim

A. - Because the procedures for registration of death vary by country, situations in which the insured dies abroad may increase the likelihood of fraud.

Oliver had his contract terminated for repeatedly engaging in the prohibited sales practice known as churning. What did Oliver do? a. Induced clients to replace one policy after another, multiple times, so that he could earn a series of first-year commissions on the replacements. B. Misrepresented the features of a policy to induce the customer to replace an existing policy. c. Offered an unlawful cash payment to encourage a prospect to purchase a policy.

A. - Churning is a prohibited sales practice that occurs when a financial professional induces a client to replace one policy after another, multiple times, so that the financial professional can earn a series of first-year commissions on the replacements. The second answer choice describes twisting, and the third answer choice describes rebating.

Data breaches occur when cybercriminals gain access to a company's information about its customers, including personally identifiable information (PII). Cybercriminals can use PII to engage in a. Account takeover fraud b. Phishing c. Securities fraud d. Social engineering

A. - Cybercriminals often use social engineering, such as phishing, to gain access to customer data. When they use that data to illegally gain control over a customer's account, cybercriminals are engaging in account takeover fraud.

When Mickey Evans dies, his life insurance policy proceeds can't go to his named beneficiary, his wife Carla, because she is also dead. He named their adult son Alex as the contingent beneficiary, and his adult daughter Abigail as the second contingent beneficiary. Both children are still alive. In this case, who will receive the proceeds of his policy? A. Alex B. Abigail C. Alex and Abigail will each receive half of the proceeds

A. - If no primary beneficiary is alive at the time of the insured's death, the insurer will pay the benefits to the contingent beneficiary, or second contingent beneficiary if the contingent beneficiary is deceased. Since Alex is the contingent beneficiary and he is still alive, the insurer will pay the proceeds to him.

Replacements can be internal or external. Is surrendering an insurance policy and using the proceeds to buy another insurance policy from the same insurer an internal or external replacement? a. Internal b. External c. Need more information to determine

A. - In an internal replacement, the same insurer sells both policies. In an external replacement, different insurers sell the policies.

Companies use different types of professionals to sell their products. Can you distinguish among them? Lucy Champion has a contract with ABC Life and sells primarily that company's life, health, and annuity products to individual clients. Lucy is a a. Career agent b. Multiple-line exclusive agent c. Salaried sales representative

A. - Lucy is most likely a career agent, which is an agent who is under a full-time contract with an insurer to sell primarily that insurance company's life, health, and annuity products. Also known as a captive agent.

Which of the following enables personalized sales to customers through multiple, integrated communication channels? a. Omnichannel distribution b. Worksite marketing c. Location-selling

A. - Omnichannel distribution is the term generally used for distribution that enables personalized sales to customers through multiple, integrated communication channels.

When disbursing funds to a customer, Forthright Financial's employees must use acceptable communication channels and use specific methods of verifying customer identity in order to protect customers from possible fraud. Which of these approaches to safeguarding confidential information does NOT protect customers? a. Allowing customers to request disbursements via telephone, email, and instant message. b. Allowing telephone requests only for amounts under a specified limit. For amounts in excess of the limit, requiring the customer to mail or fax a signed form so the signature can be compared to the signature on file. c. Mailing checks only to the address specified in the company's records.

A. - The first choice doesn't protect customers because these communication channels don't allow customers to provide any visual proof of identity, such as a signature. In addition, email and instant messaging are not considered private communication channels.

Policy proceeds and interest are paid in a series of payments over the payee's lifetime. A. Life Income Option B. Retained Asset Account (RAA) Option C, Fixed-Period Option D. Interest Option E. Fixed-Amount Option.

A. - This option is known as the life income option. The insurer would calculate the amount of each payment using actuarial assumptions about various factors, including how long the average person of the beneficiary's age and sex is likely to live.

In order to comply with Reg BI, insurers and financial professionals recommending variable annuity and insurance products must place the customer's financial interests ahead of the financial professional's or the insurer's interests. A. True B. False

A. - This statement is true. This regulation sets a standard that requires financial professionals and insurer's to consider the consumer's interests ahead of their own.

Raylite Life Insurance prioritizes having a high degree of control over its distributors. Raylite should choose a direct distribution system. a. True b. False

A. - With a direct distribution system, Raylite can control the customer journey and collect customer data in a way that supports its customer experience strategy.

New business processing

All of the activities required to process applications for insurance products, evaluate the risks associated with applications for life insurance, and issue policies. includes all of the activities: Processing applications Underwriting applications Issuing policies

What factors do you think insurers consider when deciding which channels to use? Choose all that apply. a. Customer characteristics b. Costs c. Control d. Expertise e. Product characteristics f. External marketing environment

All of them

Providing excellent customer service is important because it (choose all that apply) Increases productivity Results in cost savings Enhances a company's image and reputation Enables a company to attract and retain better employees and financial professionals Enables a company to gain a competitive edge Attracts new customers Builds customer loyalty Retains customers Results in greater profitability

All of them -

What factors do you think insurers consider when deciding which channels to use? Choose all that apply. a. Customer characteristics b. Costs c. Control d. Expertise e. Product characteristics f. External marketing environment

All of them - Insurers typically consider all of these characteristics when deciding which channels to use.

Forthright's persistency rate on policies is low. Why is this a problem? Choose all that apply: It's an indication that financial professionals aren't servicing policyowners, which is one of their responsibilities. The company may lose money on policies that lapse in the first few years after issue. Policyowners who drop their policies may be buying policies from the competition.

All of them- A low persistency rate indicates that financial professionals aren't servicing policyowners, the company may lose money from policies not remaining in force long enough to recapture expenses, and the company may be losing business to the competition.

Which of the following are examples of products that can be offered as voluntary benefits? Choose all that apply. Life insurance Disability income insurance Accident insurance Critical illness insurance Long-term care insurance

All of them- All of the above benefits are examples of voluntary benefits. Some financial professionals engage in worksite marketing to distribute these benefits. Submit

Use the following information to answer the questions below. Fred Kingsley, a claim analyst, received a claim for the proceeds of a $500,000 life insurance policy. Although the claim included a claimant's statement and death certificate as proof of loss, Mr. Kingsley suspected claim fraud and initiated a claim investigation. In this situation, claim fraud could have been committed by (choose all that apply) The policy beneficiary The medical provider who signed the death certificate The financial professional who sold the policy

All of them- Any person who is in a position to influence a claim decision or benefit from an approved claim can commit claim fraud. Such a person can be an insured, a beneficiary, a medical provider, a financial professional, or an insurance company employee.

Why are these sales practices a problem? Choose all that apply. a. Customer complaints could rise. b. The company may face increased market conduct scrutiny from regulators. c. Customers may file lawsuits against Forthright. d. The situation indicates Forthright is recruiting some agents of questionable character.

All of them- Rebating, churning, and twisting have negative consequences, including more customer complaints, increased market conduct scrutiny, and lawsuits. These practices also could indicate that agent recruiting practices need to be improved.

What personal risk factors would affect a person's mortality risk? Choose all that apply. A. Occupation B. Tobacco use C. Alcohol and drug use D. Driving history E. Avocations F. Aviation activities G. Military status

All of them- These are all examples of personal risk factors that affect a person's mortality risk.

What do you think would be appropriate actions to improve market compliance? Choose all that apply. Develop and communicate clear, specific compliance standards and consequences of non-compliance Enhance compliance training Require financial professionals to sign a contract agreeing to reimburse the company for any damages it incurs because of their actions Conduct field audits to review financial professionals' case files Go on joint calls with financial professionals to verify a compliant sales approach Examine complaint files to identify patterns that suggest market conduct problems

All of these would be appropriate actions to improve market conduct compliance except requiring financial professionals to reimburse the company for damages caused by their actions.

voice of the customer

All the stated or unstated attitudes, needs, preferences, and behaviors of customers, as captured by the company.

Career agent

An agent who is under a full-time contract with an insurer to sell primarily that insurance company's life, health, and annuity products. Also known as a captive agent.

Brokers

An independent agent who does not have an exclusive contract with any single insurer or specific obligations to sell a single insurer's products.

personal-producing general agents (PPGAs)

An independent agent who receives special consideration for satisfying minimum sales production requirements.

Registered Investment Advisers (RIAs)

An individual or organization that is registered either with the federal Securities and Exchange Commission (SEC) or with a state's securities agency and provides advice on investing in securities.

nonproprietary products

An insurance product developed by one insurance company that is sold by another insurance company. Offer a new product without spending the money or time necessary to develop the product Enter a new market quickly Decrease the risks involved with introducing a new product by experimenting with selling that product or product line before fully committing to it Better satisfy customers by offering a more complete product mix

Print and Broadcast Media

An insurer or financial professional may use printed publications, such as magazines or newspapers, to describe a particular product and generate interest in that product. Insurers can try to reach a particular target market by printing advertisements in newspapers in certain geographical areas or in magazines that appeal to certain demographics. For example, an advertisement for an annuity product designed for people age 62 or older might appear in a magazine for retired people. An insurer can use radio, television, or video streaming sites to disseminate an advertising message over a wide area to a large, generally undifferentiated audience. However, selecting certain programs or times of the day in which to advertise does allow an insurer some selectivity. For example, a life insurance product might be advertised on television between the hours of 8 and 10 p.m. when newly married couples or young parents are likely watching television.

Direct Mail or Email

An insurer or financial professional using direct mail or email distributes insurance sales materials through a mail service directly to a list of prospective customers. These mailings can be physical letters, brochures, or flyers mailed to the prospect or emails sent to a distribution list. The target market for direct mail might be readers of a particular publication or holders of a particular credit card. For paper mail, the sales materials usually consist of an introduction letter, a brochure that describes a particular product, an insurance or annuity application, or an inquiry form the customer can use to request further information about the product. For email, the insurer provides links to similar items on the insurer's website.

Independent distribution network

An organization that provides services to financial professionals and also submits business generated by the financial professionals to insurance companies. Also known as a brokerage general agent (BGA) or independent marketing organization (IMO).. Agent recruiting and appointment Education and training Point-of-sale support Business development support, such as help with lead generation Agency management support Assistance with case submission Specialty underwriting expertise

Insurers today use technology to detect and prevent fraud

Anti-fraud software aids in detecting and flagging potentially fraudulent activities. Predictive analytics allows insurers to analyze large amounts of data on past incidents of fraud to identify characteristics shared by known instances of fraud. Insurers then compare those factors with the data from a set of transactions currently under review to find fraud more easily. Insurers use their staff's experience, instincts, and common sense to spot potential fraud.

personally identifiable information

Any information that can potentially be used to identify a person, including Social Security number, driver's license number, and bank account number.

good order check

Application form is correct one Application form and product applied for have state approval Application is complete Other forms required by insurer and state have been completed Financial professional and insurer are licensed to sell policy

agent turnover

As we've seen, an insurer can spend an enormous amount of money on recruiting, training, and supporting just one agent. This kind of investment can't be taken lightly. Assuming the agent is performing well, the insurer doesn't want him or her to leave prematurely.

Sound underwriting consist of

Assessed accurately Classified properly Approved for an appropriate premium rate or denied accurately With sound underwriting, every insured pays his fair share for coverage. Riskier people pay more for coverage than less risky people

Malia helps her employer clients design, implement, and administer benefit programs. Malia is a a. PPGA b. Wholesaler c. Employee benefits broker d. Registered representative

C. - An employee benefits broker helps her employer clients assess the benefit needs of their workforce and design, implement, and administer benefit programs to meet those needs.

Underwriting is the process of (choose all that apply): A. Establishing premium rates to be charged for specific products B. Assessing and classifying the degree of risk a proposed insured or group represents C. Making a decision to accept or decline a proposed risk

B & C - Underwriters are responsible for assessing and classifying the risk and making a decision to accept or decline the proposed risk. As we discuss later in this lesson, establishing premium rates to be charged for specific products is the job of actuaries.

Underwriters evaluate financial risk factors to ensure (choose all that apply): A. The amount of coverage is appropriate and reasonable for the person's specific needs B. The premium is affordable for the applicant C. The applicant's occupation is safe and appropriate

B & C- Underwriters evaluate financial risk factors to ensure that the amount of coverage is appropriate and reasonable for the person's specific needs and that the premium is affordable for the applicant. The applicant's occupation is a personal risk factor (not a financial risk factor). Also, rather than saying the underwriter determines whether an occupation is "safe" or "appropriate," it is more accurate to say the underwriter considers whether a more dangerous occupation indicates a higher mortality risk.

Greg Bustos, a financial professional, works with a life insurance applicant to fill out an abbreviated application on his tablet. Mr. Bustos also submits an agent's statement, in which he notifies the insurer of some observations he has made about the applicant which might affect the underwriting decision. The next day, Robert Thompson, who works for a specialized vendor hired by the insurer, telephones the applicant and asks a series of scripted questions to obtain additional information necessary to process the application. Which of the following does this scenario illustrate? Choose all that apply. A. Instant issue underwriting B. Teleunderwriting C. Straight-through processing D. Field underwriting

B & D.- Mr. Bustos submitting an agent's statement is an example of field underwriting—the process whereby a financial professional assesses the likelihood of an application being approved for a certain coverage and gathers information about the applicant and proposed insured. The phone call from Mr. Thompson is an example of teleunderwriting, in which a home office employee or vendor collects most of the information needed for underwriting over the phone or video chat.

During the good order check, a new business employee or the insurer's automated system ensures that the (choose all that apply): A. Case file is created B. Application form is the correct one C. Forms required by the insurer and state have been completed D. Financial professional and insurer are licensed to sell the policy

B, C, & D. - Confirming that the application form is the correct one, that other forms required by the insurer and the state have been completed, and that the financial professional and insurer are licensed to sell the policy are all steps in the good order check. Creating the case file is an important new business task, but not part of the good order check.

D2C distribution can occur through which of the following engagement methods? Choose all that apply. a. Face-to-face b. Online c. Phone d. Mail e. Email f. Social media

B, C, D, E, & F - D2C is by definition not face-to-face, but can occur by all the other engagement methods listed.

Although verifying proof of loss is routine in most cases, a claim analyst would typically conduct further investigation in some situations. Identify whether the analyst would investigate further in each situation described below. The insured disappeared under unverifiable circumstances but the claimant submitted a court order stating that the insured is presumed dead. A. Investigate further B. Approve the claim

B. - A court order stating that the insured is presumed dead establishes proof of the insured's death.

The Argon Insurance Company's biggest concern is spending too much on its distribution system. Argon should consider a direct sales distribution system using career agents. a. True b. False

B. - A direct sales distribution system using career agents is the most expensive method of distribution. Argon should consider a more cost-effective approach.

Trudy, a 43-year-old woman, received a life insurance application via direct mail and applied for a $500,000 policy. On her application, she said she'd never applied for or been denied coverage. However, she had applied for another policy with another insurer six months earlier. That insurer had denied coverage when it discovered that she'd been diagnosed with emphysema a year earlier. Trudy's decision to purchase insurance because she believes her emphysema puts her at risk is an example of A. Persistency B. Antiselection C. Insurable interest

B. - Antiselection is the tendency of people who believe they have a greater-than-average likelihood of loss to seek insurance protection to a greater extent than do those who believe they have an average or a less-than-average likelihood of loss. Trudy had a higher likelihood of death than someone without emphysema and sought coverage, thus demonstrating antiselection.

Only an insured or a beneficiary can commit claim fraud. A. True B. False

B. - Anyone who can influence a claim decision or benefit from an approved claim can commit claim fraud. Such a person can be an insured, a beneficiary, a medical provider, financial professional, or an employee of the insurance company.

Companies use different types of professionals to sell their products. Can you distinguish among them? Brian Delange maintains his own office where he sells a variety of products—annuities and life, health, and p/c insurance—for XYZ Insurance Group. Brian is a a. Career agent b. Multiple-line exclusive agent c. Salaried sales representative

B. - Brian is most likely a multiple-line exclusive agent, which is an agent who sells life insurance, health insurance, annuities, and property-casualty products for one insurance company, with the majority of sales being property-casualty products.

Select the interaction between a claim department and a customer that would be considered an unfair claim settlement practice under the (NAIC) Model Unfair Claims Settlement Practices Act. A. Claim analyst Marie Kensington hired an outside investigator to verify information related to a claim. B. Claim analyst Garth Giske frequently authorizes claim settlements that are substantially less than the actual amount due. C. After reviewing a claim for accidental death benefits, claim analyst Maxine Harmon determined that the claimant had misinterpreted the policy's accidental death benefit provision and denied the claim. D. Trent Jeffers, an analyst trainee, unknowingly failed to complete his first claim investigation within the required amount of time after receiving proof of loss.

B. - Compelling claimants to initiate lawsuits to recover death benefits by offering substantially less than the amounts due is an unfair claims settlement practice.

Complex products are typically distributed through D2C distribution methods. a. True b. False

B. - Complex products typically require face-to-face interactions. Simpler products can often be distributed through other methods, such as D2C.

One benefit of automated claims processing is that companies can rely on computers to process complex claims. True False

B. - Generally speaking, insurers use computers to automatically process simpler claims that meet certain criteria and are below a specified dollar amount. This frees up claim analysts to process more complex claims.

The policyowner wishes to renew a five-year term policy. The CSR explains some ways that a cash value policy might better meet the customer's needs. A. Conserving B. Up-selling C. Cross-selling

B. - Here the CSR engaged in up-selling because she promoted a more powerful, more enhanced, or more profitable product than the one the customer originally considered.

Although verifying proof of loss is routine in most cases, a claim analyst would typically conduct further investigation in some situations. Identify whether the analyst would investigate further in each situation described below. The insured died by suicide after the policy's suicide exclusion period expired. A. Investigate further B. Approve the claim

B. - If death occurs by suicide after the exclusion period expires, the insurer is liable for the proceeds.

November 17, 2013, Sarah Lawson, the policyowner-insured of an individual life policy, disappeared under unexplainable circumstances. Seven years later, on December 1, 2020, there was still no evidence of Ms. Lawson's reappearance, and a court issued an order presuming her death. On December 15, 2020, the beneficiary of Ms. Lawson's policy submitted a claim for the policy proceeds. The insurer most likely will accept the court order as proof of loss and continue with the claim evaluation process, regardless of whether premiums for the policy were paid during the entire period of disappearance. a. True b. False

B. - If the premiums weren't paid, the policy would have lapsed and the insurer isn't responsible for accepting the court order or continuing the process. If the premiums were paid, the insurer would accept the court order and continue with the process.

James Propov is an 83-year-old retiree living solely on Social Security, and he has a net worth of $73,000. He wants to buy a life insurance policy so his adult children can inherit something to compensate them for the care of his five dogs upon his death. Do you think Mr. Propov would be a suitable candidate for variable life insurance? a. Yes b. No c. Can't tell; need more information

B. - In general, a variable product would not be suitable for an 83-year-old. A person with a relatively short life expectancy may not have time to recover money lost because of downturns in the financial markets.

The first step in a series of face-to-face meetings with a prospect is for the financial professional to present the proposal in hopes of completing the sale. a. True b. False

B. - One of the first steps in engaging face-to-face with a prospect is for the financial professional to identify the prospect's financial needs. A competent and ethical financial professional normally would not present a proposal without first understanding the prospect's needs.

Insurers use a number of techniques to prevent and detect fraudulent acts. Which of these is a technology that allows insurers to spot potential fraud by analyzing large amounts of data on past incidents of fraud in comparison with the data from a set of transactions currently under review? a. Cybersecurity initiatives b. Predictive analytics c. Antifraud software d. Multifaceted authentication

B. - Predictive analytics is a technology that allows insurers to spot potential fraud by comparing data on past instances of fraud with data from a current set of transactions under review. Antifraud software aids in detecting and flagging potentially fraudulent activities, but it doesn't necessarily do so by analyzing data on past incidents. Cybersecurity initiatives and using multifaceted authentication can help prevent fraud, but they aren't what is described in the question.

Which of these is an example of a qualitative performance measurement? The abandonment rate is below 5 percent. CSRs handle all telephone calls with courtesy and professionalism. CSRs respond to all written requests for beneficiary changes within two days of receipt. CSRs process 90 percent of all transaction requests within one week of receipt.

B. - Quantitative performance measurements rely on numerical methods to judge performance, while qualitative performance measurements focus on behaviors, attitudes, or opinions. Forthright is using a qualitative measurement when it measures whether CSRs handle customer interactions with courtesy and professionalism.

Yunel Mendoza was the insured under a $100,000 life insurance policy that included an accidental death benefit. After Mr. Mendoza died in an accident, a claim analyst approved the claim and determined the following amounts pertaining to the policy: $300 in premiums paid in advance A $3,000 outstanding policy loan $200 in accrued policy loan interest $5,000 paid up additional coverage $400 in declared but unpaid policy dividends $100,000 accidental death benefits What are the total proceeds payable to the beneficiary? A. $201,700 B. $202,500 C. $205,700

B. - The correct amount is $202,500.$100,000 basic death benefit+ 300 premium paid in advance+ 5,000 paid-up additional coverage+ 400 declared but unpaid policy dividend+100,000 accidental death benefit$205,700 subtotal- 3,000 outstanding policy loan- 200 policy loan interest$202,500 proceeds payable

Policy proceeds are deposited into an interest-bearing checking account in the payee's name. A. Life Income Option B. Retained Asset Account (RAA) Option C, Fixed-Period Option D. Interest Option E. Fixed-Amount Option.

B. - This option is known as the retained asset account (RAA) option. The payee can withdraw some or all of the proceeds from the account at any time.

An underwriter does not usually consider an individual's family health history as a medical risk factor for life insurance. .A. True B. False

B. - This statement is false. An individual's family health history is an important underwriting consideration.

Indicate whether each of the following is an example of active or passive VOC data collection. Collecting data about the frequency of complaints by using speech analytics software on a sampling of recorded customer phone calls a. Active b. Passive

B. - Using speech analytics software to pull data from recorded phone calls is an example of passive VOC data collection because recordings are analyzed without directly asking questions to customers.

The goal of claim administration departments is to pay all claims immediately. a. True b. False

B. - While paying claims quickly is a priority for claim departments, they must balance speed with paying only valid claims.

Can all claim analysts process all kinds of claims? a. Yes b. No It depends

B. - ust as not all underwriters can approve all applications, not all claim analysts can process the same types of claims. Let's look at how it works.

Training

Because he is an affiliated agent, Forthright wants to ensure Joe is well trained. The level of training provided to agents varies depending upon the agent's experience and relationship with the insurance company. However, insurers are required by law to ensure that all of their agents are trained in market conduct laws and acceptable sales practices. New agents like Joe typically go through an initial period of sales, product, and on-the-job training Experienced agents receive mostly product training because they do not need training in needs analysis and general sales techniques Insurers conduct agent training in formal classes at the home office, regional sales offices, or the agency office, or through virtual training featuring online classrooms or self-study courses.

Susanna Bling is 53 years old and her annual gross income is $100,000. According to the factor table above, what is the maximum amount of insurance coverage she could purchase, assuming she is an insurable risk? a. $400,000 b. $500,000 c. $1 million d. $1.5 million

C. - Because Susanna is 53 years old, she can purchase 10 times her annual income of $100,000, or $1 million of coverage.

A life insurance applicant mentions to her financial professional that she is worried about her retirement savings lasting her lifetime. The financial professional asks if the applicant would be interested in hearing about longevity insurance and other types of products that can address that problem. A. Conserving B. Up-selling C. Cross-selling

C. - Here the financial professional engaged in cross-selling because he identified an existing customer's needs for additional products while selling a primary product. Then the financial professional promoted a complementary product that, combined with the primary product, provides a more complete solution for the customer.

Paige's Aunt Leona has considered purchasing a life insurance policy on Paige's life, as Paige is her favorite niece. However, since Leona is not likely to suffer a financial loss if Paige dies, she does not fulfill the requirement of A. Persistency B. Antiselection C. Insurable interest

C. - In insurance, an insurable interest is presumed to exist between certain close family members. In addition, a person possesses an insurable interest if that person is likely to suffer a genuine economic loss should the event insured against occur. Leona will not suffer an economic loss if Paige dies, nor is she presumed, as an aunt, to have an insurable interest in her niece's life. Therefore, she does not fulfill the insurable interest requirement.

Forthright received applications for individual life insurance from the following two people: Cho Lin's mortality risk is significantly lower than average. Estelle Galloway's mortality risk is higher than average, but Forthright's underwriters consider her to be insurable. Choose the response below that correctly identifies how Forthright's underwriters would classify Mr. Lin and Ms. Galloway. A. Mr. Lin as standard and Ms. Galloway as substandard b. Mr. Lin as standard and Ms. Galloway as declined c. Mr. Lin as preferred and Ms. Galloway as substandard d. Mr. Lin as preferred and Ms. Galloway as declined

C. - Proposed insureds whose mortality risk is predicted to be significantly lower than average fall in the preferred risk class. Those with higher-than-average mortality risk—but still insurable—fall in the substandard risk class. Thus, Mr. Lin is in the preferred class and Ms. Galloway is in the substandard class.

et's see what you already know about settlement options. Identify each settlement option described below. Policy proceeds and interest are paid in equal installments for a specified period of time. A .Life Income Option B. Retained Asset Account (RAA) Option C. Fixed-Period Option D. Interest Option E. Fixed-Amount Option

C. - This option is known as the fixed-period option. For example, the beneficiary might request to receive monthly payments for ten years.

When Allison Veasey applied for an insurance policy on her life from the Diamond Insurance Company, she mistakenly stated on her application that her age was 47, when her true age was 49. As a result, the insurer charged a lower premium than it would have charged if it had known her true age. A year after the policy went into effect, Ms. Veasey died. The policy beneficiary submitted a claim, and a claim analyst at Diamond discovered the misstatement of age on the policy application. What will Diamond do? A. Rescind the policy on the basis of a material misrepresentation in the application and retain all premiums paid B. Rescind the policy on the basis of a material misrepresentation in the application and refund all premiums paid C. Reduce the amount of the proceeds to the amount that the premiums would have purchased for a 49-year-old insured

C. - When a claim analyst discovers a misstatement of age while processing a claim, he adjusts the benefit payable to the amount the premiums paid would have purchased at the correct age.

Channel cannibalism occurs when a new channel brings in new customers. a. True b. False

Channel cannibalism occurs when a new channel steals customers from an existing channel instead of bringing in new customers.

four main distribution challenges

Channel conflict Agent turnover Prohibited sales practices Persistency

n insurer can face consequences if it pays a claim too slowly or too quickly.

Claim processing must have a balance of speed and accuracy. Not paying quickly enough can mean that the insurer must add interest to the proceeds payable. Too much haste can lead to payment of an invalid claim.

The Role of Automation

Companies can use technology to automate existing tasks. Computers can perform many tasks quickly, cheaply, and with consistent quality. The best candidates are generally highly repetitive tasks with well-defined rules, such as routine, uncomplicated life insurance claims. When computers automatically pay claims that meet certain requirements and are below a specified dollar amount, claim department staff are freed up to concentrate on investigating less routine claims for fraud or unintentional mistakes.

external marketing environment

Conditions in the external marketing environment can make one distribution option more appealing than others. Changes in the economy, technology, laws, and competitive pressures can all impact which distribution method an insurer uses or how an insurer will use a particular method. examples: Customer expectations for convenience have led some insurers to offer the option to purchase life insurance through an entirely online transaction. To meet customers where they are, some financial professionals connect with prospects through social media. Insurers wishing to sell products internationally must consider which distribution systems are available in each market (e.g. brokers are widely used in the U.S. and Canada, but don't exist in many other countries).

Administer financial transactions

Customers who contact an insurance company often need to complete financial transactions, such as - Fund allocations: In a variable insurance or annuity product, the policyowner chooses how premiums will be invested; and he can change his investment fund choices periodically. - Policy loan: A loan made by a life insurance company to the owner of a life insurance policy that has a cash value. - Dividend options: An owner of a participating policy can receive policy dividends in several ways, and he can change how he wishes to receive the dividends periodically. - Surrender: A policyowner can surrender—or terminate—her policy and receive the net cash surrender value—the actual cash value available to a policyowner upon policy surrender or lapse. - Reinstatement: After a life insurance policy has lapsed, the policyowner may ask to reinstate—or put back in force—the original policy. - Replacement: The purchase of one life insurance policy or annuity contract using money received from the surrender of another life insurance or annuity contract.

Landon promotes Forthright's products to intermediaries and provides them with marketing support. Landon is a a. Employee benefits broker b. Independent agent c. Platform employee d. Wholesaler

D. - A person who promotes an insurer's products to intermediaries and provides the intermediaries with marketing support is known as a wholesaler.

Antoine Blake purchased a whole life policy from the Barnard Insurance Company on June 12, 2017. The policy contained a typical two-year suicide exclusion period. On August 23, 2020, Mr. Blake committed suicide. At the time of his death, no policy loans were outstanding. In this situation, the beneficiary of Mr. Blake's policy was entitled to receive a. No payment of any kind b. A refund of all premiums paid only c. The policy's net cash surrender value only d. The policy's full death benefit

D. - If an insured dies by suicide during the policy's suicide exclusion period (usually two years from policy issue), the insurer's payment is limited to a refund of premiums paid, less any outstanding loans. However, Mr. Blake's death occurred more than two years after the policy was issued, after the suicide exclusion period expired. The beneficiary is entitled to the full death benefit.

Sam is an independent insurance agent who represents his clients, not an insurer or other financial institution. Sam does not have an exclusive contract with any single insurer or specific obligations to sell a single insurer's products. Sam generally receives compensation in the form of commissions. Sam is a a. PPGA b. Registered investment advisor (RIA) c. Platform employee d. Broker

D. - The description best describes an insurance broker.A PPGA does not legally represent his clients. An RIA generally does not receive commissions. A bank platform employee is not generally an insurance agent.

The insurer invests the policy proceeds and periodically pays interest on these proceeds to the payee. A. Life Income Option B. Retained Asset Account (RAA) Option C, Fixed-Period Option D. Interest Option E. Fixed-Amount Option.

D. - This option is known as the interest option.

evidence of insurability

Documentation that a proposed insured appears to be an insurable risk.

Suitability or best interest check

Double-check that financial professional sold amount and type of coverage that are appropriate for the customer Ensure the product meets best interest standards as applicable

Policy proceeds and interest are paid in a series of equal payments for as long as the proceeds last. A. Life Income Option B. Retained Asset Account (RAA) Option C, Fixed-Period Option D. Interest Option E. Fixed-Amount Option

E. - This option is known as the fixed-amount option. For example, the beneficiary might request to receive monthly payments of $500.

Exception-based underwriting

Electronic underwriting that automatically accepts applications that meet certain well-defined criteria and refers the rest for further evaluation by a human underwriter.

policy issue

Enter data Assemble policy Facilitate policy delivery Collect post-issue requirements

Worksite Marketing

Financial professionals sometimes engage in worksite marketing to distribute voluntary benefits. Usually, the employer collaborates with the financial professional to promote voluntary benefits to employees. Examples of voluntary benefits include: Life insurance Disability insurance Accident insurance Critical illness insurance Long-term care insurance ID theft protection Legal services Financial counseling

Financial Risk Factors

Financial risk factors are the financial information that an underwriter considers to determine whether a person is applying for more insurance than he reasonably needs or can afford. Examples of financial risk factors include Current income Potential income Net worth Underwriters evaluate financial risk factors to ensure that the proposed insured needs the coverage applied for, and that a reasonable relationship exists between the need for the coverage and the amount of coverage applied for. The type of policy and amount of coverage should be appropriate and reasonable for the person's specific needs and financial situation. If the applicant and beneficiary seek an excessive amount of insurance on the proposed insured, they may be wagering on whether the insured will live. Such a wager is against public policy. Financial risk factors also help underwriters consider if the premium is affordable for the applicant. If the proposed insured can't afford the premiums, the policy may lapse, or terminate. Unexpected lapses are bad for the persistency rate and can lead to poor financial results.

When investigating claims, Forthright must

Follow all privacy laws Obtain information by only lawful, reasonable, and ethical means Protect the confidentiality of information

Low persistency

For life insurance, persistency occurs when a policy remains in force as a result of the continued payment of the policy's renewal premiums. If policyowners are unable or unwilling to make these payments, the insurer has a problem—or perhaps more than one problem.

Morality risk

For life insurance, the likelihood that a person will die sooner than statistically expected; for annuities, the likelihood that a person will live longer than statistically expected.

Appointment

Forthright appointed Joe to be its agent by notifying the appropriate insurance regulators that it authorized him to sell for it. Joe isn't alone, though. Anyone who sells policies on behalf of Forthright—even bank employees—must be licensed and appointed. Licensing specialists in an insurer's home office oversee agent licensing to ensure that all agents are qualified to sell the company's products and are appropriately licensed and appointed for the jurisdictions in which they are to offer products. It's really important that home office employees in charge of handling contracting, licensing, and appointments work effectively and efficiently. If they don't, salespeople can't sell. And woe to any employee who lets a sale go through if it's in a state where the agent isn't licensed—fines, potential lawsuits, headaches all around.

Other sales support

Forthright provides various other types of sales support to agents like Joe, for example Office space and materials in a field office Business development support to identify qualified sales leads for the agent Marketing support to promote the general quality of their agents Sales aids such as introductory sales kits and sample sales presentations Enhanced service support for highly valued agents, such aso Exclusive telephone lines for sales and operations supporto Extended hours of telephone supporto Dedicated personnel in areas such as underwriting, customer service, and claims ID theft protection Advanced underwriting to help with proposals or accompany the agent to sales presentations, especially when the agent intends to use insurance products in a financial plan or in estate planning Technology support to promote operational efficiencies

Internal Fraud

Fraud committed by an insurer's employees, officers, directors, or insurance producers.

External Fraud

Fraud committed by individuals outside a company who have some type of business relationship with the company.

Channel conflict

Friction or disagreement within or between channels. most often occurs when: Channels or channel members do not share the same purpose, and their goals and objectives are not mutually beneficial; The specific roles and performance expectations of each channel or channel member are not clearly stated, understood, or mutually accepted; One distribution channel cannibalizes another.

accessibility

How easily customers can reach someone at an insurance company. - service level - abandonment rate - number of blocked calls - average speed of answer - misdirected calls

Compensation

Generally speaking, first-year commission rates for life insurance policies range from 40 to 90 percent of the policy's first-year premium. First-year commissions are designed to generate sales. Renewal commission rates are lower than the first-year commission rate—usually 2 to 5 percent of premiums received—and they are paid only on policies that remain in force. Renewal commissions are designed to encourage agents to sell quality business that will remain in force. Sometimes insurers pay a service fee, which is a small percentage of premiums, often 1 or 2 percent, that is payable after renewal commissions have ceased. Service fees are typically paid to the agent who is currently providing service to the customer, even if that agent did not originally sell the policy. Annuity commission schedules often combine a one-time commission on each contribution the owner makes to the annuity with a trail commission that is paid at regular intervals and is calculated as a percentage of the accumulated contract value. Commission rates for financial professionals who are not part of a direct field force are typically higher than the commission rates for direct field force agents. Direct field force agents receive lower commissions because they typically receive some financial benefits that are not provided to the other types of agents.

Determining if Benefits Are Payable

Here's what a claim analyst must verify to determine whether death benefits are payable: The policy was in force when the loss occurred. The deceased is the insured. The loss occurred. The policy covers the loss. The analyst also examines whether the policy is contestable and, if so, whether the application for insurance contains any material misrepresentations.

data entry

ID# assigned Case file created

Unexplainable Disappearance

If no specific peril can reasonably explain the disappearance, the claim analyst usually denies a life claim that is filed immediately after the disappearance. An insurer cannot approve a claim until it receives sufficient proof of the insured's death. In the United States, if the insured hasn't reappeared after a certain period (five or seven years, depending on the jurisdiction), the claimant can petition the court for an order presuming the insured's death. A court order stating that the insured is presumed dead establishes proof of the insured's death. If the policy has been kept in force during the disappearance, the claim analyst usually will accept the court order as proof of loss and will continue the claim evaluation.

Model Unfair Claims Settlement Practices Act

In the United States, a National Association of Insurance Commissioners model act that specifies a number of actions that are considered unfair claims practices if committed by an insurer (1) in conscious disregard of the law or (2) so frequently as to indicate a general business practice. Prohibited practices include Failing to promptly acknowledge receipt of claim-related communications Failing to affirm or deny coverage of claims within a reasonable time after the claim investigation is completed Attempting to settle claims based on an application that was materially altered without the policyowners' knowledge Requiring a proof of loss form as well as subsequent verification that duplicates the original proof of loss Compelling claimants to initiate lawsuits to recover death benefits by offering substantially less than the amounts due Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue Refusing to pay claims without conducting a reasonable investigation Failing to provide forms necessary to present claims within fifteen (15) calendar days of a request with reasonable explanations regarding their use Potential consequences that could arise from this unethical action include Regulatory fines Financial professionals placing business elsewhere Disciplinary action for the employee Legal action against the company Rating downgrade

Securities and Exchange commission (SEC)

In the United States, a federal agency responsible for administering and enforcing federal securities laws and regulating the securities industry, as well as for executing policies that affect securities markets.

interpleader

In the United States, a procedure by which an insurer pays a policy's proceeds to a court, advises the court that the insurer cannot determine who should receive the proceeds, and asks the court to determine the proper recipient or recipients.

prohibited sales practice

In the United States, insurers must abide by the market conduct laws described earlier in the lesson, which govern how insurers and financial professionals behave. Market conduct laws prohibit certain sales practices that can harm customers. examples: When a financial professional promises a benefit to a prospect to purchase a policy or annuity when that benefit isn't in the product itself and isn't offered to all others, he is engaging in rebating. If a financial professional misrepresents the features of a policy to persuade a customer to replace his current policy, the financial professional is engaging in twisting. A financial professional that convinces a customer to replace policies or annuities over and over so the financial professional can earn many high commissions is engaging in churning.

Business Partners

In the context of customers, an organization that helps a company develop, distribute, or service its products They act as business partners by advising customers about products. Like internal customers, they are paid by the company and receive services from company employees

passive voice of the customer data

Information that customers reveal without being asked through unsolicited behavior or feedback

Quantitative Performance Measurements

Insurance companies use quantitative performance measurements to evaluate aspects of customer service such as speed, accuracy, and timeliness. Other quantitative performance measures assess productivity, which is often an indication of how quickly and efficiently a process is working. Quantitative performance measurements are useful because they generate concrete information about people and their behaviors that can be analyzed, summarized in the form of numbers, and easily communicated to other Example - benchmarks: A performance standard, often based on a standard achieved by leading companies, that represents a company's goal for performance.

Claim Audits

Insurers conduct internal audits of approved and denied claims, and are also subject to external audits of claim practices.

Market conduct

Insurers must regularly monitor the sales activities of all of their agents to ensure compliance with market conduct laws. And whenever regulatory requirements change, insurers are required to communicate the changes to agents accurately and promptly. An insurer's monitoring system should include a method for identifying and reporting agents who are found to be unsuitable to sell insurance products. Some infractions are unintentional and merely indicate a need for additional training. However, serious infractions, or a pattern of minor infractions, require disciplinary action, up to and including a termination of the agency contract. Regulators may suspend or revoke the license of an agent who engages in conduct that violates the laws in that jurisdiction. Unlawful sales practices include churning, twisting, and rebating. The figure below illustrates how a company supports an agent to prepare him for sales.

Recruiting

Insurers spend a lot of money to recruit and train new career agents. They need to make sure they spend that money on the right people, and that the right people stay. pre contact training can consist of: The principles of life insurance and annuities The products and practices of the hiring company How to meet customer needs with various products

Expertise

Insurers want their distributors to have a high degree of sales experience and to be knowledgeable about the insurer and the insurer's products. Not only will these people be able to identify the customer's primary need and meet it with an appropriate product, but they can also engage in identifying an existing customer's needs for additional products. examples: Insurance brokers have a high degree of sales experience and general knowledge about insurance products, and they recognize the importance of additional sales to increase their earnings. Career agents and multiple-line exclusive agents are more familiar with their primary insurer's product portfolio than are brokers who sell the products of many insurance companies.

Differences between ppgas and brokers

Insurers who use brokers often try to get as many of them as they can in an area, pay them a straight commission, provide few services, and often receive relatively little business from each broker Insurers who use PPGAs are more selective, compensate the agents more generously, provide some degree of support services, and usually get substantial amounts of business from each PPGA

artificial intelligence (AI)

Intelligent machines that develop to work, "learn," and react like humans.

Licensing

Joe became licensed by each jurisdiction in which he will sell insurance and for each line of insurance—for example, life, health, P&C—he planned to sell. As is required in the United States, the home office makes sure that he sells policies only in states where he is licensed. To obtain a license in the United States, Joe was required to Pay a licensing fee Pass a written examination in each line of insurance he planned to sell Provide assurance that he is of reputable character

Conserving

Keeping an insurance policy or annuity in force.

malware

Malicious software installed on a computer or system by an unauthorized outside user in order to perform unwanted tasks, such as stealing data.

Ransomware

Malware which freezes a company's computers or blocks access to company data, restoring access only if the company pays a ransom.

cybersecurity

Measures undertaken to protect a company's computer networks, systems, and data from unauthorized access.

Online

Most insurers' websites provide information and self-service options and promote products that can satisfy needs. Insurers also advertise their products through third-party websites and social media. Consumers using these websites may contact the company by telephone, email, or web chat to ask questions or purchase a product. Often, insurers put these consumers in contact with a financial professional. Financial professionals may also use websites and social media to engage with customers directly.

Companies use different types of professionals to sell their products. Can you distinguish among them? Natasha Platkin is paid a salary to service group products. Natasha is a a. Career agent b. Multiple-line exclusive agent c. Salaried sales representative

Natasha is most likely a salaried sales representative, which is a company employee who is paid a salary for making insurance sales and providing sales support.

advantages to a company of customer loyalty are the following

New business through referrals and positive reviews in public forums A dependable revenue stream Opportunities for additional purchases Data that can be used to further improve the customer experience

direct to consumer (D2C) sales

Non-face-to-face distribution programs directed by the insurance company.

Insurer's records searched for information about applicant and insured, such as

Other coverage Other applications pending or denied Prior claims or complaint

Annuity Death Benefit Process

Processing annuity death benefit claims is very similar to processing life insurance death benefit claims but differs in some ways 1. Authenticating and Documenting the Claim As with life insurance claims, annuity death benefit claims start with a claimant's statement and official death certificate. 2. Determining the Amount of the Death Benefit The death benefit amount is usually the annuity's accumulated value on the day the insurer receives required documentation. 3. Addressing Applicable Tax Issues Unlike life insurance death benefits, annuity death benefits typically result in taxable income to the beneficiary. The insurer reports the total payment, the taxable portion of the payment, and any taxes withheld to the beneficiary and to tax authorities. 4. Paying the Death Benefit The insurer pays the annuity death benefit as a lump sum or according to a settlement option chosen by the contract owner or beneficiary.

speech analytics

Software that analyzes the words and phrases that customers use and also their tone of voice and voice changes that can provide information about their emotional states.

Business Rules Engine

Software that automatically applies rules to data to reach a decision.

problem: agent turnover

Solution—Forthright is now auditing compliance with its recruiting and contracting guidelines and agent profile. Forthright also offers new opportunities for professional development, networking, and recognition to increase morale and encourage agents to remain with the company. This should help increase the agent retention rate.

Problem: channel conflict

Solution—Forthright is paying careful attention to how it designs its products, organizes its operations, and plans its marketing. So they can address conflicts early, Forthright staff now identify all potential channels at the beginning of the product development process.

problem: prohibited sales practice

Solution—Forthright is taking a number of actions to be sure financial professionals obey market conduct laws.

problem: low persistency

Solution—Forthright is working to increase employee morale and improve training, which can encourage agents to provide better service to existing policyholders.

Location selling

Some insurance companies also sell insurance products through a method known as location-selling. These locations can be staffed by a financial professional or offer self-service options for customers. Location-selling systems may be located in businesses such as department stores, big box stores, grocery stores, and funeral homes.

Product Characteristics

Some products are more effectively and efficiently sold through one distribution system than another. examples: A complex product such as universal life insurance typically requires a face-to-face engagement method. Simpler products, such as term life insurance, can be distributed through a D2C distribution system. Some products, such as variable life insurance or variable annuities, must be sold by a person who is a registered representative of a licensed broker-dealer.

cost basis

The amount invested in an insurance contract, equal to the sum of all premiums paid less withdrawals, dividends, and outstanding policy loans

control

The amount of control an insurer needs to have over its distributors affects the distribution system the insurer chooses. An insurer that wishes to exercise a great deal of control over distribution activities typically develops a direct distribution system, consisting either of a direct sales force or D2C distribution, or potentially both. With a direct distribution system, the insurer can control the customer journey and collect customer data in a way that supports its customer experience strategy. Insurers have less control over intermediary distribution channels. However, insurers may be able to include some controls in these distributors' contracts. Insurers can also run promotions from time to time that reward distributors if they perform well in a given region, product line, or market situation.

Explainable Disappearance

The claim analyst may presume the insured to be dead if a specific peril can reasonably explain the disappearance, such as a plane crash in the ocean with no bodies found. He probably would accept the claimant's statement and accident reports as proof of death and would continue with the claim evaluation.

Customer Characteristics

The distribution system through which a product is sold should meet the needs of the customers in the insurer's target market. examples If an insurer has identified as a target market older, wealthier individuals who expect personalized service, then a distribution system that can provide personalized service is probably best. Customers who prefer to compare products and prices over the internet at their own convenience might prefer to purchase online.

service recovery

The efforts an organization makes to fully resolve a problem that caused a customer's dissatisfaction and to win back the customer's goodwill.

Straight-Through Processing

The electronic processing of every step in the new business process without manual intervention.

Insurance Application

The insurance application is an underwriter's best overall source of information for assessing the risk of a proposed insured. Traditionally, insurers have divided their life insurance applications into two parts—Part I and Part II—but it's becoming more and more common for these parts to be referred to as nonmedical and medical. Both parts give underwriters valuable information needed to assess the risk of a proposed insured. Click or touch each heading below to learn more.

Claim administration

The insurance function that is responsible for evaluating, processing, and paying valid claims for contractual benefits that policyowners or beneficiaries present. Also known as claim adjudication, claim handling, claim processing, or claim servicing. Claims should be processed as rapidly as possible to meet the needs of beneficiaries and comply with claims processing regulations. Companies must ensure that they are paying only valid claims. A small number of life insurance claims are submitted under erroneous interpretations of policy provisions. An even smaller number of claims are submitted fraudulently.

What happens if risks are accepted at premium rates that are not adequate for their true risk?

The insurer will pay more in claims than it can afford. Plus, the insurer could face consequences, such as Disciplinary action from insurance regulators Loss of reputation Poor financial results Insolvency

Medical

The medical section of a life insurance application provides detailed medical information about the proposed insured. The proposed insured answers questions about her medical history and signs this portion of the application, which becomes part of the contract. This section takes one of three forms: Nonmedical supplement—the medical history provided by the applicant, with or without the participation of a financial professional or teleunderwriter Paramedical report—the medical history recorded by a paramedic plus the findings of a paramedical exam Medical report—the medical history recorded by a doctor plus a doctor's medical exam findings Characteristics of the proposed insured, such as his current health and health history, family health history, and the amount of insurance applied for, determine whether a nonmedical supplement is sufficient or whether the proposed insured will be asked to undergo a paramedical or medical exam. The choice of medical form is important because of cost. A medical report is expensive, a paramedical report less expensive, and the nonmedical supplement is the cheapest of all. The form used is also important because of the amount of time it takes and the level of inconvenience it represents for the proposed insured. The lengthier and more onerous the underwriting process, the more likely that the applicant will not complete the process.

distribution systems

The method an insurance company uses to connect its products or services with the potential customers who might want or need them.

Nonmedical

The nonmedical part of the application gives some of the information needed to evaluate whether the amount and type of insurance are appropriate for the proposed insured: Annual income Purpose of insurance Beneficiary and his relationship to the proposed insured Type of plan applied for Face amount applied for Quoted premium The nonmedical information becomes part of the insurance contract when signed by the applicant, proposed insured, and the financial professional.

customer journey

The path each individual travels with a company, including every interaction across every touchpoint and every communication channel.

response rate

The percentage of targeted customers who respond to a direct-to-consumer sales approach.

Data analytics

The practice of applying analytical techniques to large amounts of raw data in order to draw conclusions and make business decisions.

Underwriting

The process of (1) assessing and classifying the degree of risk a proposed insured or group represents with respect to a specific insurance product and (2) making a decision to accept or decline that risk. Also known as selection of risk.

Suitability

The process of determining whether a particular insurance or annuity product is an appropriate purchase for an applicant based on the applicant's needs and financial condition.

claim investigation

The process of obtaining the additional information necessary to make an appropriate claim decision. Sources of additional information for a claim investigation can include: Medical records Motor vehicle records Criminal court records Autopsy Reports Investigative consumer reports Any other source that might help

Field Underwriting

The process that occurs when the financial professional gathers initial information about the applicant and proposed insured and makes an initial assessment as to whether they are likely to be approved for a specific type and amount of coverage

complaint management system

The processes and procedures for recording, evaluating, and taking action on complaints.

Section 1035 exchange

The tax-free exchange of certain insurance and annuity policies permitted under Section 1035 of the U.S. Internal Revenue Code. Three exchanges qualify as 1035 exchanges and are not taxable events: One life insurance policy for another life insurance policy, where both policies insure the same person and have the same owner A life insurance policy for an annuity One annuity for another annuity where benefits are payable to the same person Exchanges that do not qualify as 1035 exchanges are An annuity for a life policy A life policy insuring one life for a life policy insuring two lives

timeliness

The time it takes to complete a customer request or transaction, such as answering a question, underwriting an application, processing a claim, issuing a commission check, or processing a withdrawal or an account transfer. - first contact resolution: In a contact center, refers to the percentage of inbound customer contacts that are successfully completed at the initial point of contact—that is, without being transferred and without the need for follow-up work. Also known as one-call resolution, one and done, and once and done.

contestable period

The time period following policy issuance within which an insurer has the right to void a life insurance contract if the application for insurance contained a material misrepresentation.

identity theft

The unauthorized use of a person's name and other personal information for fraudulent purposes such as obtaining credit or purchasing goods and services. To make sure that the people who contact the company really are who they claim to be, insurance companies may Require the customer to provide information, such as home address, telephone number, mother's maiden name, or password. Assign each customer a personal identification number (PIN) or customer identification number (CIN) that must be provided to proceed with a request. Using a PIN or CIN also protects against fraud that involves family members—although a family member may have access to a policyowner's personal information, they are less likely to know the policyowner's PIN. Use multifaceted authentication that requires a customer to use a PIN and supply a code the insurer sends to the customer's mobile phone number that's on record.

Underwriting process

The underwriting process is as follows: 1) App received. 2) Underwriter reviews app. 3) Is more info needed? If yes, obtain additional info. If no, decide risk class. 4) Either decline app or approve it. 5) If app is approved, policy is sent to policyowner. 6) Policyowner accepts policy. 7) Policy in force.

agency operations units

The unit in an insurance company that supports and services the insurer's direct sales force. These are put in place to ensure that: - Strategic goals and objectives for the company's agency operations are consistent with the insurer's overall goals and objectives - Policies and procedures for agency operations are in compliance with all regulatory requirements - Performance standards are in place to measure agency operations - Home office services, including customer service, are in place to adequately support agency operations

Financial exploitation

The wrongful or unauthorized taking, withholding, appropriation, or use of another person's funds or securities or any act or omission taken by a person to deprive someone of the ownership, use, benefit, or possession of the person's own money, assets, or property Financial exploitation may be perpetrated by strangers, acquaintances, or trusted individuals, including Family members, including sons, daughters, grandchildren, and spouses Friends, acquaintances, or romantic partners Professional caregivers Health care providers Unscrupulous professionals or financial advisors Predatory individuals who target victims to engage in fraudulent activities or scams

Instant Issue Underwritng

Underwriting in which technology automatically assesses the risk presented by an application and renders an underwriting decision instantly. Also known as real-time underwriting.

Which of the following are metrics that a company might use to measure success? Choose all that apply. Call turnaround time Customer retention rate Customer Satisfaction Score (CSAT) Error rate

all - of these choices are correct! Metrics serve a variety of purposes that are important to a company's success and to the customer's experience.

Some investigations are quick and simple. Others are extensive. Select all factors that might make the claim investigation extensive. Death is unusual given the insured's age Mysterious death Death occurred during suicide exclusion period or contestable period Policy has an exclusion rider Death is from natural causes Policy has a relatively high face amount Death happened abroad

all but death from natural causes - A claim investigation might be extensive if the death is mysterious or unusual given the insured's age; if it occurred during the suicide exclusion or contestable periods; or if it happened while the insured was traveling in a foreign country. The investigation also might be extensive if the policy has an exclusion rider or a relatively high face amount.

Market conduct exams evaluate how well an insurer's claim department handles various aspects of claim processing, including (choose all that apply) Processing claims according to policy terms Investigating and settling claims on time Accurately calculating claim payments Paying claims to the correct payee Ensuring that staff comply with the Model Unfair Claims Settlement Practices Act

all of them

Mr. Kingsley from our previous question can protect the privacy of the insurer, the policy beneficiary, and other people involved in the claim investigation by concealing the actual purpose of the investigation from people he speaks to as part of the investigation. A. True B. False

b. - Insurers may use only lawful, reasonable, and ethical means of obtaining information when investigating claims. Many jurisdictions prohibit conducting an investigation under a false pretext.

A decrease in persistency is what happens when .a. agents leave a company prematurely b. agents engage in churning, twisting, or rebating c. policyowners stop paying premiums and policies lapse

c. - Although the first two options can lead to dissatisfied customers, a decrease in persistency is what happens when policyowners discontinue payment of a policy's renewal premiums and let their policies lapse.

A customer's feeling of attachment to or preference for a company's people, products, or services is a. Service recovery b. Customer retention c. Customer loyalty d. Customer satisfaction

c. - Loyal customers continue to place repeat business with a company, despite influences and marketing efforts of competing companies that could cause the customer to switch.

adverting account takeover fraud

cybercriminal attempts to take over a Forthright customer's account. The Forthright CSR sends an email or text to the customer that contains a real-time code. In legitimate transactions, the customer supplies the code to the CSR. In fraudulent ones, the customer is alerted to the attempted account takeover. Account takeover fraud is averted.

quality

quality rate: The total number of transactions handled or processed that had no reported errors. error rate: The percentage of transactions handled or processed that result in errors.

cross-selling

sales activity in which a financial professional or CSR identifies an existing customer's needs for additional products and invites the customer to purchase complementary products that, when combined with the product the customer already owns, provide a more complete solution for the customer's needs.