Ch1 D Under Writing Flashcards
the risk selection and classification process. It involves a careful analysis of many different factors to determine the acceptability of applicants for insurance. In other words, underwriting is the process in which an insurance company determines whether or not a particular applicant is insurable, and if so, what premium to charge.
Underwriting
To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss. This is called
Insurable interest
In life insurance, insurable interest must exist between the policyowner and the insured at the time of
Application
Know this
Insurable interest must exist at the time of application. The policyowner must have insurable interest in the life of the insured.
Know this
An insurance application is the key source underwriters use for information about the applicant.
established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. The law also protects consumers against the circulation of inaccurate or obsolete personal or financial information.
Fair credit reporting act
include written and/or oral information regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Consumer reports
are similar to consumer reports in that they also provide information on the consumer’s character, reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
Investigative consumer reports
Know this
KNOW THIS
Insurance applicants must be notified in writing whenever insurers request investigative consumer reports.
Know this
An individual who unknowingly violates the Fair Credit Reporting Act is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.
Know this
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.
Know this
The consumer has the right to know what was in the report.
includes bankruptcies more than 10 years old, civil suits, records of arrest or convictions of crimes, or any other negative information that is more than 7 years old.
Prohibited information
membership corporation owned by member insurance companies. It is a nonprofit trade organization the purpose of which it is to collect, maintain, and make available to insurance companies important underwriting information on applicants for life and health insurance
Medical information bureau
Know this
Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.
——which is completed by a paramedic or a registered nurse; and
The underwriter may require an—-
Paramedical report
Attending physician statement
When applicants submit to an hiv test they must
Disclose the use of testing to the applicant, and obtain written consent from the applicant on the approved form;
Establish written policies and procedures for the internal dissemination of test results among its producers and employees to ensure confidentiality.
federal law that protects health information. HIPAA regulations provide protection for the privacy of certain individually identifiable health information (such as demographic data that relates to physical or mental health condition, or payment information that can identify the individual),
Health insurance portability
allows disclosures without individual authorization to public health authorities authorized by law to collect or receive the information for the purpose of preventing or controlling disease, injury, or disability.
Privacy rule
Risk classification to be used allows disclosures without individual authorization to public health authorities authorized by law to collect or receive the information for the purpose of preventing or controlling disease, injury, or disability.
Risk classification
persons who, according to a company’s underwriting standards, are entitled to insurance protection without extra rating or special restrictions. They are average risk.
Standard risk
individuals who meet certain requirements and qualify for lower premiums than the standard risk.
Preferred risk
applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits.
Substandard (high exposure)risk
Risks that the underwriters assess as not insurable are declined.
Declined risk
life insurance arrangement in which a person with no relationship to the insured (a “stranger”) purchases a life policy on the insured’s life with the intent of selling the policy to an investor and profiting financially when the insured dies.
Stranger oriented life insurance
violate the principle of insurable interest, which is in place to ensure that a person purchasing a life insurance policy is actually interested in the longevity rather than the death of the insured.
Stoli (stranger oriented life insurance)
is another name for a STOLI, where a third-party investor who has no insurable interest in the insured initiates a transaction designed to transfer the policy ownership rights to someone with no insurable interest in the insured and who hopes to make a profit upon the death of the insured or annuitant.
Invested own life insurance
explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies.
Buyers guide
a written statement describing the features and elements of the policy being issued. also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years.
Policy summary
means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.
Illustration
Know this
No premium no coverage
The purpose of the Act is to address social, economic, and global initiatives to fight and prevent terrorist activities.
USA patriot act
require banks, broker-dealers, and other financial institutions to establish new anti-money laundering (AML) standards.
Finacial crime enforcement network
state that procedures and plans must be in place and designed to identify activity that one would deem suspicious of money laundering, terrorist financing and/or other illegal activities
Suspicious Activity Reports (SARs) Rules
requires 2 disclosures to a customer (a consumer who has an ongoing financial relationship with a financial institution):
When the customer relationship is established (i.e., a policy is purchased); and
Before disclosing protected information.
Gramm leach billet act
