Field Underwriting Procedures

Question 1

Agent/Producer

Answer 1

A legal representative of an insurance company; the classification of producer usually includes agents and brokers

Question 2

Applicant or proposed insured

Answer 2

A person applying for insurance

Question 3

Insurable Interest

Answer 3

The policyowner facing the possibility of losing something of value in the event of loss.

Question 4

Insured

Answer 4

Person covered by the insurance Policy may or may not be the policy owner

Question 5

Elements of a Contract

Answer 5

Agreement, Consideration, Competent Parties, Legal Purpose

Question 6

Consideration

Answer 6

Something of value that each party gives to the other.

**Insurer’s consideration is the promise to pay for losses
**Insured’sconsideration is the payment of premium and statements on the application

Question 7

Mentally Competent to enter a contract

Answer 7

Legal age, not under any form of influence by mind altering drugs/alcohol, and mentally competent

Question 8

Warranty

Answer 8

An absolutely true statement upon which the validity of the insurance policy depends.
Breach of warranties can be considered grounds for voiding the policy or a return of premium

Question 9

Representations

Answer 9

statements believed to be true to the best of one’s knowledge but they are not guaranteed to be true.

**Representations are statements believed to be true. Insured’s statements on the application are representations.

Question 10

Material Misrepresentations

Answer 10

Statement that if discovered would alter the underwriting decision of the insurance company. (fraud if intentional)

Question 11

Conditional Contract

Answer 11

Requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed and before each party fulfills its obligations

Question 12

Unilateral Contract

Answer 12

Only one of the parties to the contract is legally bound to do anything
“Take it or leave it” terms

Question 13

Adhesion Contract

Answer 13

prepared by one of the parties (insurer) and accepted or rejected by the other party (insured).
No negotiations

Question 14

Aleatory Contract

Answer 14

exchange of unequal amounts of values
(ex: John pays $100 per month for a premium for an insurance policy that is $100,00. John has only had the insurance policy for a couple of months when he dies. The insured would get the full $100,000 in that event.)

Question 15

Notice to the applicant when applying

Answer 15

issued to all applicants for health insurance coverage. This notice informs the applicant that a credit report will be ordered.

Question 16

Completeness and Accuracy of Application

Answer 16

**It is the agent’s responsibility to make sure that an application for insurance is complete and accurate to the best knowledge of the applicant (representations)

Question 17

Signatures

Answer 17

Every health insurance application requires the signature of the proposed insured, the policyowner (if diff than insured), and the agent who solicits the insurance

Question 18

Changes in the Application

Answer 18

Any changes on the application need to be initialed by the applicant.

Question 19

Premiums with the Application

Answer 19

Usually a premium is sent over with the application, however the agents cannot bind coverage. (insurance is not covered until it is approved by the insurer)

With no premium with application the agent must collect he premium and obtain a statement of continued good health from the applicant before releasing the policy

Question 20

Underwriting

Answer 20

The process of reviewing applications for insurance and the information on the application.

Question 21

Fair Credit Reporting Act

Answer 21

Established procedures that consumer reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used

Used to check if they can pay their bills on time ect…

Question 22

Medical Information Bureau (MIB)

Answer 22

Membership corporation owned by member insurance companies. It collects, maintains, and makes available to insurance companies important underwriting information on applicants for life and health insurance

**Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report

Question 23

Attending Physician Report (APS)

Answer 23

Used for higher amounts of coverage or if the application raised additional questions concerning the prospective insured’s health.

A statement from a medical practitioner who treated the applicant for prior medical problems.

Question 24

Paramedical report

Answer 24

Used for higher amounts of coverage or if the application raised additional questions concerning the prospective insured’s health.

Statement from a paramedical or registered nurse

Question 25

HIV test rules

Answer 25

-Underwriting for HIV is permitted as long as it is not unfairly discriminatory.
-Insurer obtains written consent from applicant.
-Insurance companies must maintain strict confidentiality

Question 26

Consumer Reports

Answer 26

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

Question 27

Investigative Consumer Reports

Answer 27

Similar to consumer reports but also provide information on the consumer’s character, reputation and habits by talking with close friends, family, and neighbors.

Insurance applicants must be notified in writing whenever insurers request investigative consumer reports

3 days advised in writing of the date the report was requested
5 days for insurer to provider consumer with additional information if applicant asks.

Question 28

Policy Delivery

Answer 28

Policy does not have to be handed to the insured in person
Once the delivery of the policy is made the FREE LOOK PERIOD BEGINS

Question 29

Explaining policy and its provisions, riders, exclusions, and ratings

Answer 29

Agent is required to explain these all, especially if there are changes in the policy.

Question 30

Replacement of a Policy

Answer 30

There cannot be any coverage gap between the existing coverage and replacement coverage

Question 31

Pre existing Conditions

Answer 31

Health conditions covered under the current policy may not be covered under the new policy because of pre existing condition limitations or new waiting periods may be required in a new policy