Chapter 7: Underwriting And Policy Issue

Question 1

What is the purposes of underwriting?

Answer 1

• Determine if an applicant is insurable and what premium amount to charge them
• Does Insurable interest exist (clear financial impact on policyholder)

Question 2

What are the three parts to an underwriting application?

Answer 2

Part 1 - General Information

Part 2 - Medical Information

Part 3 - The Agent’s Report (observations made by agent)

Will also include other reports/investigations and beneficiaries

Question 3

Medical Information Bureau Report

Answer 3

Agent can get adverse medical information on potential applicants

Question 4

Consumer Reports

Answer 4

Agent can get information on applicants reputation and habits that have been collected by employment records, credit reports and other public records

Question 5

Investigative consumer reports

Answer 5

Similar to consumer reports but information is collected through interviews with friends, associates and neighbors

Question 6

Fair Credit reporting act

Answer 6

If an applicant is denied coverage or the coverage is altered because of information found in investigations the applicant had a right to know what was in the report

Question 7

Risk Classifications (3)

Answer 7

Standard - Considered an average risk

Substandard - Not acceptable standard risk due to health, family health history, occupation or dangerous habit. Higher premiums

Preferred Risk - Have lower premiums due to outstanding health and habits

Question 8

Field Underwriting Procedures (7)

Answer 8

Responsibilities:

• Proper solicitation
• Prevent adverse selection
• Completing application
• Getting signatures
• Collecting initial premium
• Delivering policy
• issuing receipt

Question 9

Conditional Receipt

Answer 9

Applicant is covered by insurance company the date of the application (if approved)

Question 10

Backdating

Answer 10

Lower premium rates by dating the application for a past date (no more than 6 months earlier)

Question 11

When does an insurance policy become effective?

Answer 11

When the initial premium is collected and the policy is issued

Question 12

When does someone most likely have an insurable interest in insuring a persons life?

Answer 12

When an economic interest exists for the continuance of the insureds life

Question 13

What is a requirement of any change in an insurance application?

Answer 13

Must be initialized by the applicant

Question 14

What guarantees that the statements supplied by an applicant are true?

Answer 14

Warranty