chapter 7 Flashcards
the tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance in force (i.e., the selection against the insurance company). Sound underwriting reduces adverse selection.
adverse selection
the date halfway between birthdays when the applicant’s age changes to the next higher age. With some insurers, the age is based upon the applicant’s age at his nearest birthday. In others, it is based upon the age of his last birthday.
age change
person completing the application to the insurance company for the insurance policy
applicant
Statement of information given when a person applies for life, health, or disability insurance. The insurance company’s underwriter uses this information as a basis in determining whether the applicant qualifies for acceptance under the company’s guidelines.
application
used when the application or medical examiner’s report reveals conditions or situations, past or present, about which more information is desired. Because of Physician/Patient confidentiality, the applicant must sign an authorization, which allows the physician to release information to the insurance company underwriter.
Attending Physician Statement (APS)
practice of making the effective date of a policy earlier than the application date. is used to make the issue age lower than an applicant’s real age in order to get a lower premium.
backdating
one of the types of receipts given by an insurance company upon the completion of an insurance application if the initial premium is collected with the application. Insurance becomes effective on the receipt date and continues for a specified period of time or until the insurer declines the application.
binding receipt/ unconditional receipt
Without it, no coverage is in force until the policy is issued, delivered, and accepted with the initial premium paid.
conditional receipt
detailed background investigation that may include an interview with coworkers, friends, and neighbors about an applicant’s character, reputation, lifestyle, etc.
consumer report/ investigative consumer report
summary of an insurance applicant’s credit history (credit score, debt levels, repayment history, and assumed creditworthiness, etc.), made by an independent organization that has investigated the applicant’s credit standing.
credit report
an individual whose application for coverage was rejected by an insurance company.
declined risk
comparison form required by various state regulatory agencies to be given to every policyowner when replacing an existing policy with another.
disclosure form
law passed in 1970 that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage.
fair credit reporting act
agent or producer completing the applicant’s application for insurance.
field underwritere
report that contains general information regarding the health, habits, finances, and reputation of an applicant.
inspection report
financial or emotional relationship between two or more parties justifying one owning a life insurance policy on the other.
insurable interest
service organization that collects medical data on life and health insurance applicants for member insurance companies.
medical information bureau
person whose life is requesting to be insured. Typically, but not always, this is also the applicant.
proposed insured
additional charge to the standard premium because the person insured is classified as a higher -than-average risk.
rated policy (rating up)
legal activity where a producer convinces a prospective client to lapse or surrender a life or health policy and purchase a new one.
replacement
describes an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for a loss involving certain existing health impairments.
special class
analysis of information obtained from various sources pertaining to an applicant for insurance and the determination of whether or not the insurance should be issued as requested, offered at a higher premium, or declined.
underwriting
application submitted without an initial premium
trial application
