Underwriting

Does FCRA restrict the amount or type of information collected?

No. ONLY regulates the disclosure of personal information. can ONLY be released to a third party with written consent of the applicant

Can an app be declined solely on MIB information?

No. There must be other factors that substantiate then denial of coverage

Who is required to sign an application?

applicant, insured if different, producer. IF corporation is the policyowner, app must be signed by one or more corporate officers

Parties to a contract

applicant, policyowner, insured, beneficiary

What is in the agent/producer report?

based on producer observations, he/she answers several questions in part 3 of the application. Applicant is only required to sign parts 1 and 2

What happens if the proposed insured dies during underwriting process?

benefits are only paid if the insurer would have been approved if living

Third party ownership arrangements:

parent or guardian's policy on a child, grandparent owning a policy on a grandchild, spouse, fiance, domestic partner owning his or her partner's policy, business partner owning policies on each other, key employee

Testing process for AIDS

state laws vary with types of tests. Applicant signs consent for blood draw, release form must be signed by applicant

Policies may be issued as the following:

as applied for, as modified or amended, with a waiver excluding death by certain causes

Insurance companies MUST inform applicants about any investigations being made in processing the application

TRUE

APS

attending physicians statement, applicants medical records from the physician

Standard risk

average risks issued without special restrictions or additional rating. NO discounts or rate-up in premium

Substandard risk

below standard risk level, use of extra percentage tables, flat extra premiums, temp premiums, rate-up in age to adjust premiums

buyers guide

given to each applicant at time of application, offers info to help consumers shop for insurance

When does life insurance coverage start?

immediately following paid premium and medical exam

field underwriting

initial meeting between the producer and the applicant to start the underwriting process. Producer can VISUALLY observe the health of the applicant

statement of good health

submitted without initial premium and needs to be signed while delivering the policy. ALSO must verify good health STILL since application originally

Certain medical conditions reported in the application may require an attending physician's statement

true

MIB files on applicants must be disclosed to their physician upon request of the applicant

true

applicant must sign an authorization form allowing the MIB information to be given to a company member

true

applications taken with initial premium statistically are accepted more often?

true

What is the most costly mode?

monthly premiums, they want to be paid ahead of time

insured

person whose life is insured

Monthly premiums

10 day grace period, withdrawn from checking or savings, paid directly to insurer

Fair Credit Reporting Act (FCRA)

1970, protects consumer rights to privacy and from disclosure of inaccurate and arbitrary personal information held by consumer reporting agencies

AIDS/HIV underwriting

HIPAA requires safeguards are in place to give opportunity to refuse the distribution of this information. Many states REQUIRE that AIDS, ARC, HTLV-III are treated as the samee manner as other diseases or illnesses in 3 ways

What does the MIB contain?

Medical information in code, avocation info, insurance activity index (IAI)

Net premium calculation

Net premium= mortality - interest

Is ALL information in MIB files available to ALL MIB members?

Yes

Are medical exams required?

Yes, and paid for by the insurer. Considered life insurance underwriting

Are credit reports used in the underwriting process?

Yes, in certain circumstances

It is a good idea to deliver the policy in person so no misunderstandings occur?

Yes.

Preferred risk

above average risk, LOWER premiums

underwriting factors

age, gender, health, avocation, medical history, moral character, finances, income, zip code

Modes of premium frequency:

annually, semiannually, quarterly, monthly, weekly

Third party can ONLY use FCRA info for what?

credit, employment, or insurance evaluation, connection with granting a license or gov't benefit, legitimate business need involving the consumer

What does the buyer's guide discuss?

find a policy that meets needs and fits budget, decide how much insurance you need, make informed decisions when you buy a policy

How to calculate Gross Premiums

gross premium= mortality (life insurance) - interest + expenses

underwriting

how insurers select who they will insure and what premium rates will be. STARTS when the producer accepts an application then MUST be underwritten by a home office underwriter to be analyzed

inspection receipt

insured does not pay any premium until policy is issued and insured has time to inspect it before accepting. Sign to verify same health condition. No coverage until all of the above has taken place

Declined risk

insured doesn't meet company guidlines, rare. Usually higher premium is made or exclusions (dangerous job, age, health condition) Explanation is required

binding receipt

insurer is guaranteed coverage even if death before approved and wouldn't have been approved, initial premium must be paid though

insurance activity index (IAI)

lists the number of times information has been requested on the applicant in the past two years, prevents applicant from over-insurance by purchasing several small policies

constructive delivery

mailing the policy, assumed unconditional delivery and okay

What does the MIB do?

maintains medical information on applicants for life and health insurers; home office underwriter requests information to crosscheck and see if there is any misleading information on the application

Why is underwriting necessary?

make sure correct amount is being charged for coverage provided by assessing risks, guard against adverse selection

Inspection reports

may need to be done by an independent investigation company for LARGE amounts of insurance

conditional receipt

most commonly used by life insurers today- producer cannot guarantee coverage.

Medical Information Bureau (MIB)

nonprofit central information repository supported by more than 600 member insurance companies that support underwriting process

How are premiums originally calculated?

on annual basis, but not all can do that. Therefore, other options are given

beneficiary

person or persons designated to receive the policy benefits

applicant

person who completes the application and applies for coverage

Who are medical exams performed by?

physician or paramedical company specializing in insurance exams

4 types of Risks

preferred, standard, substandard, declined

How do you make changes on an app?

producer much thoroughly examine as completed, if any changes are made, must be initialed by the applicant owner (usually producer initials it too)

What are consequences of an incomplete application?

returned to producer to complete, but because of delays, the applicant may get impatient and withdraw the app

3 ways HIV/AIDS may be required to be treated:

underwriting decisions applied in the same manner as other diseases, limitations, deductibles, exclusions, coinsurance, applied same as other diseases, claim settlement considerations the same (new claim or continuation)

When does underwriting start

when a producer accepts an application from an applicant and continues when the application reaches the home office underwriter

effective date

when premium is received. if no initial premium is paid, effective date is issue date

policyowner

who pays the premium and has owner's rights to naming beneficiaries and policy changes. Applicant is USUALLY policyowner

applicants must be notified in writing that the insurer may make reports on the applicants health to MIB

yes, true