Unit 31: The Application and Underwriting Flashcards
Why is it that the applicant is required to sign the portion of the application? The agent fills out with the applicant? There are two reasons.
- The application is a request for contract, so the applicant must sign off on it
- The insurer is being asked to issue the contract, or policy, on the basis of the information given in the application, so by signing the app, the applicant is saying that the information in it is correct
When a mistake or an omission is discovered on the application, are you allowed to change it?
Neither the agent, or the company may correct the error. Any change must be initiated by the applicant.
What are the three reasons the application is so important?
- The application becomes a part of the policy when it is attached to the policy
- Statements made an application, become a basis for issuing the policy, because without them, and if they are wrong, they wouldn’t do it
- The application helps to more fully identify the applicant
What are representations on the application? are they guaranteed to be true?
Statements the applicant makes that he represents to be true to the best of his knowledge, but it’s not actually guaranteed to be true
What are representations sometimes confused with?
Warrenties
What are warranties?
Statements and individual guarantees or warrants are true
What is a misrepresentation? IS it intentional? what is it called if someone intentionally misrepresents themselves to a company?
a miss representation is a faults representation.
It may be intentional or unintentional. A miss representation made intentionally to deceive the insurance company to gain something is fraud.
What is a conditional receipt? Thank literally regarding receipt. That is conditional
It’s one and insured gets a policy and does the application and makes a payment on it to make it active. It is a conditional receipt conditional on the application to be approved. If the insured has their application approved, then they had coverage from the moment they made payment to make the policy active. If they are not approved, and there’s some thing that caused the underwriting to not approve it then during that period. Is there a value in things it is not to be covered. They won’t be covered if they found some thing that caused them to cancel and not approve it so the receipt and the policies conditional
What are inspection reports?
They are reports that contain information about such things as the applicants moral character financial situation
Explain medical reports
The insurance company may require physical examinations of the applicant, and this just gives them great information on the applicant. They may require an APS or an attending physician statement, which is a personal statement about their health from a doctor. This just gives them more information on the applicant.
What is the medical information bureau or MIB?
It is a not-for-profit information, agency, supported by several hundred insurance companies in the purpose of the M ideas to help companies uncover misrepresentations, or potentially fraudulent actions by applicants.
Essentially, there’s a hub where all information of applicants go there and companies can see them and it allows them to get prior receive information and reports on people
What is the NAIC or NAtional association of insurance commissioners?
It’s an association I protect the rights and privacy and information rights of consumers. Unlock the fair, credit reporting act which applies to any consumer credit transaction, the information, privacy protection act referred just directly to insurance transactions, so whereas you got judged for your overall credit, this is just how you’ve been with insurance.
Individuals must be told about request for information for marketing or other purposes not related to particular insurance transaction.
Control is an agent or prevented from making an underwriting decision that is adverse to the applicant solely on the basis of a previous adverse underwriting. Decision or data collected from the Support organization is major source of information as other insurance companiesControl is an agent or prevented from making an underwriting decision that is adverse to the applicant solely on the basis of a previous adverse underwriting. Decision or data collected from the Support organization is major source of information as other insurance companies. EX. the MIB
What are 5 commonly used factors to determine one’s risk classification?
- age
- sex
- physical condition
- Lifestyle (hobbies, substance use etc.)
- occupation
What are the 3 major risks types of insurance companies as they consider whether to write and issue a policy and if so, at what premium?
- occupational risk
- physical risk
- moral risk
What is a physical risk?
Their health condition or “physical health”
What is a moral risk?
Where is Carles concerned about an individual’s character, habits, personal and business associates Common financial practices. In some cases, there may be an overlap and risk.
For example, any type of substance abuse, and alcohol and prescription drugs, kidney, both moral and physical rest. Or if they Gamble or things like that with known criminals
What is an occupational risk? what is it also know as?
Occupational hazard. Risk of having an injury or sickness as a result of your job.
What happens in regard to occupational risk if an insured has more than one job?
The base it off whatever job is the most risky
What is it about special diseases, such as like aids that are regarding how policies are written, or how they must be treated and paid out?
They are treated exactly the same as other diseases in the process of underwriting or any provisions, or writers, or anything like that, or any claims are paid out, exactly the same
What can insurance company do if a person cannot meet the physical, moral, or occupational hazards to qualify the normal rate?
They can issue them as a substandard risk, because they are less than a standard risk or more risky
What three things can a insurance company do that are alternatives when presented with substandard risks?
- Reject the risk
- Charge a higher premium
- Attach a rider excluding specific coverages
What are the 5 “modes of payment”? In relation to payment frequency?
- weekly
- monthly
- quarterly
4, semi annually - annually
Insurers calculate premium on an annual basis and go calculate premium on an annual basis and go from there
What is the initial premium?
The initial premium paid to
How does the policy effective date work?
There is some discrepancy as to when a policy is actively effective, and when it actually starts what’s the best way to just handle understand it is no the policies effective the date it says it is effective
What is a policy fee?
The fees associated with issuing a policy, and all that requires to do so such as agent, commissions, acquisition, cost, administration, and maintenance of the policy.
What are some factors in coming up with premium amounts? 4 of them
- Morbidity experience - how many of their insurance they expect to come here or have an accident, which is the health insurance to cover it to their life insurance mentality experience. (For purposes of claims need to know what to charge)
- How much can they earn through investment of premium dollars
- operating expenses - how much those are
- Contribution to surplus - how much is left over after all claims and operating expenses are paid
What are reserves? What are the types? 2
Funds set aside to pay future claims. Any reserve set-aside to cover car in the future claims are called unpaid reserves
Unpaid premium reserves are because insurance premiums are paid in advance and insurance company. I was a certain amount of money that is not yet earned by providing protection. There’s a mountain is considered a reserve or the unearned premium reserve.
