Underwriting Sources of Information
Primary source of information
Application
Average health and normal life expectancy, fall into the normal range anticipated by the company. Can be insured for standard rates.
Standard Risks
Fair Credit Reporting Act (FCRA)
Statement of Good Health
Insured must be informed if using this type of source to gain information.
Consumer Reports
A correction can be made on the application. What must the applicant do to certify that an error occured?
Initial next to the correction
Excellent health. A risk of loss that is below average and therefore favorable to the company. May be insured at preferred or discounted rates.
Preferred Risks
The maximum penalty of obtaining consumer information reports under false pretenses
$5,000, imprisonment for 1 year, or both
3
The process of evaluating a risk to determine if it is acceptable based on established insurance company guidelines.
Underwriting
What does the producer's report tell you about the proposed insured?
Financial status, habits, and character.
Below average life expectancy, high-risk life insurance. A risk of loss that is above average and unfavorable to the company. Charged higher rates
Substandard Risks
Life insurance arrangements involving investors who persuade seniors to take out a new life insurance policy, with the investors named as the beneficiary. Banned in most states.
Stranger-Owned Life Insurance (STOLI) or Investor Owned Life Insurance (IOLI)
Who pays for medical exams and tests that are requested during the underwriting process?
The insurer
A non-profit insurance trade association that maintains underwriting information on applicants. Their files include medical history, hazardous jobs or hobbies, and poor driving records.
Medical Information Bureau (MIB)
Who is required to sign the application?
The agent/producer and the applicant.
An insurer's underwriting guidelines indicate that an applicant is not insurable at any price.
Declined Risks
Enacted to protect the interests of participants in employee benefit plans as well as the interests of the participants' beneficiaries.
Employee Retirement Income Security Act (ERISA)
Tobacco and drug usage is on what part of the life insurance application?
Part 2
A statement from the insured's regular doctor that the underwriter may ask for to find out about the applicant's current condition and medical history.
Attending Physician's Statement (APS)
Life insurance binders are called?
Temporary Insurance Agreements
Making a decision based on race, religion, national origin, or place of residence
Unfair Discrimination
To deter terrorist activity, both globally and in the US. Companies that issue permanent life insurance or annuities that have cash value must adopt procedures and internal controls for recognizing and reporting potential money laundering activities.
USA PATRIOT Act
What is the purpose of the MIB (Medical Information Bureau)?
Reduce instances of misrepresentation and fraud