Unit 2 Life/Health Insurance Underwriting

Question 1

underwriting

Answer 1

the process of evaluating a risk to determine if it is acceptable based on established insurance company guidlines

Question 2

changes to the application

Answer 2

must be initialed by the applicant

Question 3

backdating

Answer 3

allowable under life insurance applications in most states up to 6 months

Question 4

required signatures on application

Answer 4

-insured
-producer/ agent
-applicant (if not the insured)

Question 5

producer report/ producer’s statement

Answer 5

-never seen by client
-completed and signed by the producer
-not attached to the policy

Question 6

conditional receipt

Answer 6

-premium paid with application
-insurance effective date is the later or date application completed and signed or medical exam (if required)
-must be standard or preferred risk which can be determined after death

Question 7

binding receipt

Answer 7

-temporary (30-60 days)
-not common in life insurance

Question 8

underwriting sources of information

Answer 8

-the application (primary source)
+part 1: general information
+part 2: health information
+part 3: producer’s report
-attending physician’s statement (APS)
-medical examinations and testing (insurer pays)
+AIDS considerations (requires insured’s written consent)
+Medical Information Bureau (insured must be informed, application cannot be denied based on this information)
-consumer reports (must inform insured)
-investigative reports (must get consent from insured)

Question 9

4 classification of risks

Answer 9

-standard
-preferred
-substandard
-declined

Question 10

standard risk

Answer 10

average health and normal life expectancy

Question 11

preferred risk

Answer 11

excellent health. may be insured at discounted rate

Question 12

substandard risk

Answer 12

high-risk, below average life expectancy. may be rated up/ rated meaning additional charge for premium

Question 13

declined (risk)

Answer 13

applicant is not insurable at any price

Question 14

selection criteria and unfair discrimination

Answer 14

-race
-religion
-national origin
-place of residence or place of origin

Question 15

agent delivery

Answer 15

will usually get a signed receipt on delivery to the policyowner

Question 16

statement of good health

Answer 16

-required if no premium with application
-if health changed, agent can’t deliver policy

Question 17

effective date of coverage

Answer 17

the later date of money received or medical examination

Question 18

fair credit reporting act

Answer 18

-notice to applicant is required within 3 days
-third party information
-consumers have rights and can dispute information in files
-penalty: fines (max of $5,000) and/ or imprisonment (one year)

Question 19

STOLI/ IOLI

Answer 19

-banned in most states
- investors named as beneficiaries

Question 20

US Patriot Act

Answer 20

-designed to prevent and detect money laundering and financing of terrorism
-reports suspicious activity

Question 21

ERISA

Answer 21

-protects participants in employee benefit plans
-qualified pension plans and group insurance
-reporting and disclosure of information for plan participants