INSURANCE RECOMMENDATION, CONTRACT AND SERVICE NEEDS (Chapter 7)

Question 1

A&S Terminology

Attending Physician’s Statement (APS)

Answer 1

A report from the applicant’s doctor, outlining details of a condition or treatment incurred in the past.

Question 2

A&S Terminology

10-day “free look”

Answer 2

• 10 days from the date of contract delivery to determine whether to keep the policy.
• At any point during that period the policyholder has the right to return (“rescind”) the policy to the insurer for cancellation and get a refund of all premiums paid to date.

Question 3

A&S Terminology

Medical Insurance Bureau (MIB)

Answer 3

A resource for insurance underwriters to assess risk and evaluate life insurance applications.

Question 4

A&S Terminology

Morbidity rates

Answer 4

A table chart that insurance companies base their insurance pricing (premiums) and prediction of how many persons of a given age and gender in a given population will likely become disabled (or critically injured, or in need of nursing home care or health care, etc.)

Question 5

TRUE OR FALSE?

Assuming that there are shortfalls/gaps, the agent should first consider whether the client’s existing policies could be modified, through changes in coverage or the addition of riders, to create a more comprehensive insurance portfolio to meet these needs.

Answer 5

TRUE

Question 6

TRUE OR FALSE?

In regards to disability insurance policies, the longer the waiting period and shorter the benefit period, the higher the premium will be.

Answer 6

FALSE

The longer the waiting period and shorter
the benefit period, the lower the premium will be

[Ref. 7.1.2.1]

Question 7

TRUE OR FALSE?

In regards to disability insurance policies a lower premium would also result from reducing the amount of the benefits.

Answer 7

TRUE

Question 8

TRUE OR FALSE?

The actual amount of benefits provided by the policy could be reduced in disability insurance policy however, reducing benefits should likely be a “last resort” solution.

Answer 8

TRUE

• if it is still an option to reduce the coverage, the need can be determined from the budget expenses rather than reducing the coverage

[Ref. 7.1.2.1]

Question 9

The underwriting process will place a prospective life to be insured in one of three categories, what are they?

Answer 9

• Standard insurable risk;
• Non-standard insurable risk;
• Uninsurable risk (a “decline”)

Question 10

TRUE OR FALSE?

Incomplete or inaccurate information on application for insurance could result in coverage being declined.

Answer 10

TRUE

Question 11

TRUE OR FALSE?

Meeting, or managing client’s expectations could be just as important to the recommendation process as selecting the most effective product for the client’s needs.

Answer 11

TRUE

Question 12

The details of client expectations should be addressed throughout the sales and service process.

The agent should have a client file that include…

Answer 12

• A record of the expectations disclosed in the fact finding interview;
• A record of the agent having taken those expectations into consideration in his recommendations and where the product recommended meets those expectations or not, and why.
• Any issue of client expectations

Question 13

TRUE OR FALSE?

Sometimes a single policy is not the answer to the client’s needs and a combination of policies must then be recommended to provide a comprehensive solution.

Answer 13

TRUE

Question 14

In the medical question form, what is a non-medical form?

Answer 14

A questionnaire that requires the applicant to respond to a series of questions about his and his family’s health history.

Question 15

TRUE OR FALSE?

Extended health insurance tends to
rely primarily on financial questionnaires to ensure affordability.

Answer 15

FALSE

Extended health insurance tends to
rely primarily on the health questionnaire

[Ref. 7.2.3 ]

Question 16

TRUE OR FALSE?

Every insurance company has its own set of rules as to whether, or when, an applicant for Insurance is required to undergo medical tests or a medical examination as part of the underwriting process.

Answer 16

TRUE

Question 17

TRUE OR FALSE?

Coverage on disability insurance can exceed 40-60% of pre-disability income, and some policies cannot extend this range past 70%

Answer 17

FALSE

Coverage on disability insurance cannot exceed 60-70% of pre-disability income, but some policies extend this range as high as 85%

[Ref. 7.2.3.2]

Question 18

TRUE OR FALSE?

In addition to answering income-related questions on the application, the applicant may be required to provide copies of his most recent tax year’s T4 and T5 slips and/or a copy of at least his most recent T1 Income Tax Return and the corresponding Notice of Assessment from the Canada Revenue Agency (CRA)

Answer 18

TRUE

Question 19

In regards to replacing existing coverage the agent will normally be required to complete a form comparing the old and the new policies from a number of perspectives. What are those perspectives?

Answer 19

• Premium;
• Covered conditions;
• Excluded causes of disability or critical illness;
• Riders and other benefits;
• Expiration of coverage;
• Waiting and benefit periods (particularly in the case of disability insurance); and
• Definitions of covered conditions.

Question 20

Insurance companies assess applicant risk in two different ways, what are they?

Answer 20

• Financial underwriting
• Medical underwriting

Question 21

What are the considerations that have an impact on how insurers set premiums for the pricing of disability and other A&S products?

Answer 21

The following considerations have an impact on how insurers set premiums:

• Administrative costs and expenses
• Investment returns
• Lapse rates
• Morbidity rates
• Ratings and exclusions

Question 22

TRUE OR FALSE?

The amount of disability income replacement insurance issued on a given applicant is calculated according to the applicant’s risk level.

Answer 22

FALSE

The amount of disability income replacement insurance issued on a given applicant is calculated according to the applicant’s income

[Ref. 7.3.2]

Question 23

An applicant wishing to acquire DI coverage that he obviously cannot afford to maintain is a red flag to the insurer. Why is that?

Answer 23

The applicant may want the coverage in anticipation of filing a claim in the near term.

Question 24

TRUE OR FALSE?

Insurance companies rely on reports solicited from the applicant’s personal physician and input from the Medical Insurance Bureau (MIB) in order to assess whether to accept the risk of insuring a given applicant.

Answer 24

TRUE

Question 25

Why do insurance companies use Medical Insurance Bureau (MIB) during the underwriting process?

Answer 25

So that they are able to protect themselves against those applicants seeking to “over-insure” themselves (by purchasing coverage from several different companies and failing to declare the existing coverage or other current applications) or seek to obtain coverage to which they are not entitled due to medical conditions not disclosed to the insurer.

Question 26

TRUE OR FALSE?

During the application and delivery process, the contract cannot be put into force if the health or financial status has changed between date of application and date of contract delivery.

Answer 26

TRUE

The longer the delay in delivering the contract, the greater the risk of such a change occurring

[Ref. 7.4.1]

Question 27

The provincial insurance acts have specific requirements that must be met before a contract of life or A&S insurance is legally in force. Generally, the acts require that…

Answer 27

• The issued contract is delivered to the policyholder;
• The initial premium payment has been made by the policyholder;
• Neither the financial situation of the insured nor the health of the life insured under the contract
  has changed between the time of application and the time of policy delivery.

Question 28

In regards to dealing with rated cases within a policy, there are a number of steps that the agent can take to encourage the applicant to accept the policy as issued. what are they?

Answer 28

• If health or other issues are disclosed during the application, that the agent thinks might lead to a rating, he could mention this possibility to the client before the application is submitted.
• If the rating might be temporary, or subject to reassessment in the future, this should be explained to the client, to lessen the emotional impact of the rating.
• Agent should gently point out that the rationale for purchasing the coverage has not changed and perhaps indirectly imply that the need for coverage is even greater now that the applicant has been found to have additional risk factors.

Question 29

The agent should always keep in mind that the client is generally not knowledgeable regarding the intricacies of insurance and it is the role of the agent to explain the contract at time of delivery

What are the contract clauses that the agent must emphasize and adhere to the client and why?

Answer 29

• Benefits/coverage limits;
• Riders;
• Key definitions of covered conditions, particularly in regard to critical illness policies;
• Exclusions.

BECAUSE

It is critical that the applicant (and his family, particularly in the case of critical illness or long-term care contracts) has a clear understanding and appreciation of what is covered and what is not, in order to clearly establish their expectations and possibly minimize conflict between the insured and the insurer at time of claim.

Question 30

TRUE OR FALSE?

The client should always be referred to his agent for specific tax advice regarding coverage, riders and benefits.

Answer 30

FALSE

The client should always be referred to his accountant or a tax lawyer for specific tax advice.

• Caution should be taken in making definitive statements as the agent may not be aware of all factors relating to the client’s situation that could take the tax treatment of premiums and benefits outside the norm.

[Ref. 7.4.1]

Question 31

There are several basic steps that are critical to the claims process, name a few

Answer 31

• The insured must first notify the insurance company, or its representative (the agent), of the event (injury, illness, diagnosis, etc.);
• The insurance company then provides the insured with the appropriate claim forms, either by mail or delivered by the agent;
• The insured must complete the claim form, include any supplemental information (receipts, etc.)
  and forward them to the insurance company;
• The insurance company may seek further information, either through an interview with the insured, physician’s statements, tests or additional physical exams;
• The insurance company finally adjudicates the claim and either pays it, in full or in part, or denies
  benefits entirely.

Question 32

TRUE OR FALSE?

If benefits being applied for require reimbursement for medical or other services already rendered (such as dental work, chiropractic care, prescription drugs, etc.), the insurance company will want original copies of receipts for the expenditures, in order to verify both the amount and appropriateness of the claim.

Answer 32

TRUE

Question 33

All types of accident and sickness contracts (DI, CI, LTC, BOE, & Extended health) require the occurrence of some medical event prior to the payment of benefits. Give some examples.

Answer 33

• Disability policies require an inability to work and earn an income due to injury or illness;
• Critical illness policies require that the life insured suffer a covered condition or medical event
  (heart attack, stroke, etc.) triggering a claim;
• Long-term care policies pay benefits based on covered expenses for an insured unable to fulfill
  at least two of the activities of daily living (ADLs);
• Business overhead expense contracts require an inability to work and contribute to the business’
  productivity on the part of the life insured, due to injury or illness;
• Extended health policies may require an assessment of medical treatment (such as extensive restorative or cosmetic dental procedures) before expenditures are authorized for reimbursement.

Question 34

TRUE OR FALSE?

The insurer can take the insured’s word for the fact that he is suffering a disability without supporting medical evidence for the diagnosis if he has a preferred rated policy.

Answer 34

FALSE

The insurer will not, of course, simply take the insured’s word for the fact that he is suffering a disability. They are going to want supporting medical evidence for the diagnosis.

[Ref. 7.5.1.2]

Question 35

TRUE OR FALSE?

Disability benefits could be reduced if the insured’s income at time of claim is less than was reported at the time of application.

Answer 35

TRUE

Question 36

There is plenty of competition in the marketplace with excellent products. What makes the difference between all of these excellent products?

Answer 36

SERVICE

• The speed and efficiency with which the insurance company responds to the client’s needs at every step of the relationship, from application to claim. And the agent is at the forefront of that service relationship every step of the way.

Question 37

An insurance agent’s first role is to recommend solutions to meet clients’ needs. What is the role as an agent in servicing a client once a policy is in force? (name at least three)

Answer 37

The agent’s service role includes:

• Providing claim forms and other relevant documents;
• Being prompt and accurate;
• Developing a strategy for ongoing awareness of client situation and needs;
• Determining suitability of recommendation and/or the need for change;
• Documenting services provided;
• Staying in touch with the client on an annual or semi-annual basis.

[Ref. 7.6.1]

Question 38

There are a number of instances where the client will need to interact with the insurance company over the life of a policy. What are some examples of those instances?

Answer 38

• To elect an option available under the contract (like a future purchase option);
• To change or add a beneficiary to the contract;
• To advise the insurer of a personal change of address;
• To file a claim
• The agent can have a role to play by providing the client with the insurer’s prescribed form for performing any of these functions

Question 39

TRUE OR FALSE?

In providing client service, at any point in the agent/client relationship, promptness and accuracy on the part of the agent may be crucial to ensuring that the client receives full benefit from his relationship with the insurance company.

Answer 39

TRUE

Question 40

TRUE OR FALSE?

If an agent contacts or is contacted by an existing client or a prospect in need of insurance coverage, it is important that the agent meet with the individual as soon as possible, to start the application process.

Answer 40

TRUE

• Delay could result in the applicant incurring what could have been a covered event or condition before the insurance is in place, nullifying the opportunity for protection

[Ref. 7.6.1.2]

Question 41

What are some strategies for ongoing awareness of client situation and needs?

Answer 41

• The agent cannot wait for the client to come to him with updated service needs
• Agent is responsible to ensure that the client’s coverage meets his current and changing needs and evaluates the suitability of potential recommendations of coverage adjustments
• The agent should be in regular (annually or semi-annually) contact with the client
• The agent should also stress the need for the client to contact the agent if there is any material change in his
  circumstances.

Question 42

TRUE OR FALSE?

it is critical that the agent document every
step of the service process, for his own protection and the protection of the insurance company

Answer 42

TRUE

Question 43

TRUE OR FALSE?

Quarantining or complying with a curfew (with or without pandemic-related symptoms) and suffering a loss of income as a result, is sufficient to claim group or individual disability insurance.

Answer 43

FALSE

Quarantining or complying with a curfew (with or without pandemic-related symptoms) and suffering a loss of income as a result, is not sufficient to claim group or individual disability insurance

• Quarantining or complying with a curfew is not an illness, even if it results in a loss of income.

[Ref. 7.6.1.2]

Question 44

TRUE OR FALSE?

If an insured with COVID-19 has medical complications, he does not need an attending physician statement.

Answer 44

FALSE

If an insured with COVID-19 has medical complications, an attending physician must demonstrate that the insured is unable to work.

[Ref. 7.6.1.2]

Question 45

TRUE OR FALSE?

If an insured contracts COVID-19, but does not have medical complications, the insurer will not cover the insured; however, compensation might be available under government programs.

Answer 45

TRUE

Question 46

TRUE OR FALSE?

An insured covered by business overhead expense insurance who stops working temporarily due to complications of COVID-19 must, (in order to make a claim), demonstrate by means of a statement from the attending physician that he is unable to work for medical reasons.

Answer 46

TRUE

Question 47

TRUE OR FALSE?

If the insured business owner ceases his activities altogether owing to symptoms of COVID-19 or a general lockdown, where there are no other medically disabling causes, he should file a claim with the insurer.

Answer 47

FALSE

if the insured business owner ceases his activities altogether owing to symptoms of COVID-19 or a general lockdown, where there are no other medically disabling causes, he will not be able to file a claim with the insurer.

[Ref. 7.7]

Question 48

TRUE OR FALSE?

Any critical illness insurance claim resulting from complications of COVID-19 must satisfy the existing contractual definitions of the illnesses covered.

Answer 48

TRUE

Question 49

TRUE OR FALSE?

If an insured (with or without COVID-19) gets vaccinated as a preventive measure and if, following the vaccination, he suffers a stroke resulting in an inability to work and a loss of income, he not will be covered under the contract based on the disability following the illness or accident.

Answer 49

FALSE

If an insured (with or without COVID-19) gets vaccinated as a preventive measure and if, following the vaccination, he suffers a stroke resulting in an inability to work and a loss of income, he will be covered under the contract based on the disability following the illness or accident.

[Ref. 7.7]

Question 50

TRUE OR FALSE?

To be covered for long term care (LTC) insurance, the loss of daily activities must stem from an inability to work or a physical disability included in the clauses of the contract. If it is disclosed following complications of COVID-19, the insured will be covered.

Answer 50

TRUE

Question 51

TRUE OR FALSE?

Most insurance contracts will not cover the
insured if, for example, the person tests positive for COVID-19 within 30 days prior to departure, or develops COVID-19 symptoms in the days prior to departure.

Answer 51

TRUE

Question 52

TRUE OR FALSE?

In a disability insurance contract, the accidental death clause, for example, must be consistent with the definition of an accidental death along with the definition of a death following an illness or complication related to COVID-19.

Answer 52

FALSE

In a disability insurance contract, the accidental death clause, for example, must be consistent with the definition of an accidental death and not the definition of a death following an illness or complication related to COVID-19.

[Ref. 7.7]