XCEL -Health Insurance Underwriting

Adverse Selection

Adverse Selection

is the tendency of persons with a higher-than-average chance of loss to seek insurance at standard rates

Age change

The date halfway between birthdays when the age of the applicant changes to the next higher age. With some insurers, the age is based upon the applicant's age at his nearest birthday. In others, it is based upon the age of his last birthday.

Agent's Report

A written report from the agent submitted to the insurer along with the application disclosing what the agent knows, observed, or learned about the proposed insured's risks.

applicant

A person who requests or seeks something, such as a job.

application

statement of information given when a person applies for insurance

Attending Physician's Statement (APS)

the insurance company must pay for this info but it is often less expensive than ordering an examination

avocation

a hobby or minor occupation

Backdating

The practice of making a policy effective at an earlier date than the present.

Binding Receipt

Under a binding receipt, coverage is guaranteed until the insurer formally rejects the application. Even if the proposed insured is ultimately found to be uninsurable, coverage is still guaranteed until rejection of the application.

buyer's guide

provides general information about the types of life insurance policies available, in language that can be understood by the average person.

Claims Experience

is an insured's history of claims or rate of loss

community rating

Same insurance rate for everyone, as opposed to experience rating.

Conditional Receipt

insurers issue conditional receipts when agents collect the initial premium with an application

constructive delivery

A symbolic delivery of property that cannot be physically delivered.

consumer report

A report that may contain information regarding an individual's credit standing, character, reputation, personal characteristics, and mode of living.

counter-offer

Any response to an offer (other than outright rejection) which presents alternative terms for a contract.

credit report

a report on a person's creditworthiness that includes identifying information, credit cards, late payments, bankruptcies, and savings balances

Delivery Receipt

A receipt signed by the consignee as proof that the goods have been delivered to him.

disclosure form

A comparison form required by various state regulatory agencies to be given to every policyowner when replacing an existing policy with another.

earned premium

A pro-rated amount of paid-in-advance premiums allocated to the portion of the policy term that has already elapsed.

effective date

The date when an insurance policy begins (also known as the inception date).

Evidence of insurability

Any statement or proof regarding a person's physical condition, occupation, and so forth, affecting acceptance of the applicant for insurance.

expense factor

Also known as the loading charge, is a measure of what it costs an insurance company to operate.

Fair Credit Reporting Act

Act that protects privacy of background information and ensures that information supplied is accurate.

field underwriter

An insurance agent who conducts an initial policy solicitation and application. (The company's front line of underwriting)

Field Underwriting

Selection of clients by the agent in accordance with company standards

free-look period

An amount of time provided to an insured in order to examine the insurance policy.

health insurance premium

The formula for a health insurance premium is (morbidity - interest + expenses)

information and privacy protection act

Each insurer must conform with state and federal laws privacy. This act also prohibits insurers from basing their decisions solely on previous adverse underwriting decisions.

inspection receipt

A receipt obtained from an insurance applicant when a policy (upon which the first premium has not been paid) is left with the applicant for further inspection. It states that the insurance is not in effect and that the policy has been delivered for inspection only.

inspection report

Report of an investigator providing facts required for a proper underwriting decision on applications for new insurance and reinstatements.

insurable intrest

must have insurable intrest in something when a loss or damage to the insured items causes you to suffer a financial loss

intrest

represents earnings on principal

issue date

the date on which a business issues a note, bond, or stock

Medical Information Bureau (MIB)

A service organization that collects medical data on life and health insurance applicants for member insurance companies.

medical report

May be needed to provide further underwriting information, this report may be based on a recent examination with the applicant's physician or an examination conducted as part of the underwriting process

moral hazard

are applicant habits or lifestyles that indicate a higher than average level of risk for the insurer

morbidity

incidence of a specific notifiable disease

non-medical

Referred to as a _________ application, it is common for a health or life insurance policy to be issued to an applicant based solely on the medical information gathered from the application that is submitted by the applicant to the insurer

outline of coverage

Describes the basic benefits, conditions, and other terms of an insurance policy without using industry jargon

payor

The person responsible for paying the policy premium.

policy fee

A small transaction fee charged by some insurers for the first or subsequent years of the life of an insurance policy, in addition to the regular premium.

Policy Summary

a summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums. Policy summaries are often used with life insurance, long-term care insurance, and annuities.

policy term

A policy will remain in force as long as premium payments are received on time by the insurer. Depending on the frequency (mode) of premium payment, a policy's term is extended each time a premium is paid.

policyholder

A person who owns the insurance policy

preferred risk

describes an applicant who represents the likelihood of risk lower than that of the standard applicant, typically due to better than average physical condition, occupation, mode of living, and other characteristics compared to other applicants of the same age

premium

are initial payments and subsequent periodic payments required to keep a policy in force

premium mode

The frequency with which a policy premium will be paid

Premium Receipt

Receipt given to the applicant by the producer or insurer, as proof of a premium payment.

proposed insured

The person whose life is requesting to be insured. Typically, but not always, this is also the applicant.

rated policy

A policy issued at a higher premium to cover a person classified as a greater-than-average risk, usually due to impaired health or a dangerous occupation.

rated up policy

A policy issued to an applicant that reflects a higher rate, due to the presence of a greater risk, in the eyes of the underwriter. Rated-up policies often result from substandard health revealed in a medical examination or dangerous hobbies or occupations. See the two definitions immediately above

Rated-up Premium

The additional amount added to the standard premium to account for the additional risk involved in underwriting a substandard loss exposure.

replacement

A reaction in which one element replaces another in a compound or when two elements in different compounds trade places

representations

most state laws specify that the applicants statements on application are considered representations and not warranties

reserves

funds set aside for emergencies, such as a rush of withdrawals

risk classification

Describes the underwriting category into which risk is placed depending upon the applicant's susceptibility to injury, illness, or death.

Special class

Applicants who cannot qualify for standard insurance but may secure policies with riders waiving payment for losses involving certain existing health impairments.

Special Questionnaires

gather more detailed information about a non-medical aspect of applicant's life

standard risk

Describes a person who, according to a company's underwriting standards, is considered an average risk and insurable at standard rates. High-risk or low-risk candidates may qualify for increased or discounted rates based on their deviation from the standard

substandard risk

describes an applicant whose physical condition does not meet the usual min standards

Trial Application

is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent and the premium is paid

underwriter

A person who evaluates and classifies risks to accept or reject them on behalf of the insurer.

underwriting

the process of selecting, classifying, and pricing applicants for insurance

Unearned Premium

The portion of premium for which policy protection has not yet been given.

uninsurable

A person who isn't able to secure health insurance coverage due to their high risk.

USA Patriot Act

law passed due to 9/11 attacks; sought to prevent further terrorist attacks by allowing greater government access to electronic communications and other information; criticized by some as violating civil liberties

warranties

guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner

D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D MUST

correct the information and have the prospect initial the change

K applies for a health insurance policy on herself and submits the initial premium with the application. She is given a receipt by the producer stating that coverage begins immediately if the application is approved. What kind of receipt was used?

conditional

An incomplete health insurance application submitted to an insurer will result in which of these actions?

Application will be returned to writing producer

What is the initial source of underwriting for an insurance policy?

Application containing statements from the insured

P is a producer who notices 5 questions on a life application were not answered. What actions should P take?

Set up a meeting with the applicant to answer the remaining questions

What application should a producer take if the initial premium is NOT submitted with the application?

forward the application to the insurer without the initial premium

P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?

$0

(Disability income benefits that derive from an individual policy which was paid entirely by the policyowner is not subject to federal income tax.)

P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the

Fair Credit Reporting Act

The entity whose sole purpose is sharing medical data among its member companies is called the

MIB Medical Information Bureau

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

applicant's physician

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company

Which of the following correctly explains the actions an agent should take if a customer should take if a customer wants to apply for an insurance policy ?

Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.

Which of these terms accurately defines an underwriter's assessment of information on a health insurance application?

Risk Classification

Which of the following involves analyzing a case before admission to determine what type of treatment is necessary?

prospective review

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

Fair Credit Reporting Act