Ch1 D Under Writing

Question 1

the risk selection and classification process. It involves a careful analysis of many different factors to determine the acceptability of applicants for insurance. In other words, underwriting is the process in which an insurance company determines whether or not a particular applicant is insurable, and if so, what premium to charge.

Answer 1

Underwriting

Question 2

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss. This is called

Answer 2

Insurable interest

Question 3

In life insurance, insurable interest must exist between the policyowner and the insured at the time of

Answer 3

Application

Question 4

Know this

Answer 4

Insurable interest must exist at the time of application. The policyowner must have insurable interest in the life of the insured.

Question 5

Know this

Answer 5

An insurance application is the key source underwriters use for information about the applicant.

Question 6

established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. The law also protects consumers against the circulation of inaccurate or obsolete personal or financial information.

Answer 6

Fair credit reporting act

Question 7

include written and/or oral information regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Answer 7

Consumer reports

Question 8

are similar to consumer reports in that they also provide information on the consumer’s character, reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

Answer 8

Investigative consumer reports

Question 9

Know this

Answer 9

KNOW THIS
Insurance applicants must be notified in writing whenever insurers request investigative consumer reports.

Question 10

Know this

Answer 10

An individual who unknowingly violates the Fair Credit Reporting Act is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.

Question 11

Know this

Answer 11

An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.

Question 12

Know this

Answer 12

The consumer has the right to know what was in the report.

Question 13

includes bankruptcies more than 10 years old, civil suits, records of arrest or convictions of crimes, or any other negative information that is more than 7 years old.

Answer 13

Prohibited information

Question 14

membership corporation owned by member insurance companies. It is a nonprofit trade organization the purpose of which it is to collect, maintain, and make available to insurance companies important underwriting information on applicants for life and health insurance

Answer 14

Medical information bureau

Question 15

Know this

Answer 15

Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.

Question 16

——which is completed by a paramedic or a registered nurse; and
The underwriter may require an—-

Answer 16

Paramedical report
Attending physician statement

Question 17

When applicants submit to an hiv test they must

Answer 17

Disclose the use of testing to the applicant, and obtain written consent from the applicant on the approved form;
Establish written policies and procedures for the internal dissemination of test results among its producers and employees to ensure confidentiality.

Question 18

federal law that protects health information. HIPAA regulations provide protection for the privacy of certain individually identifiable health information (such as demographic data that relates to physical or mental health condition, or payment information that can identify the individual),

Answer 18

Health insurance portability

Question 19

allows disclosures without individual authorization to public health authorities authorized by law to collect or receive the information for the purpose of preventing or controlling disease, injury, or disability.

Answer 19

Privacy rule

Question 20

Risk classification to be used allows disclosures without individual authorization to public health authorities authorized by law to collect or receive the information for the purpose of preventing or controlling disease, injury, or disability.

Answer 20

Risk classification

Question 21

persons who, according to a company’s underwriting standards, are entitled to insurance protection without extra rating or special restrictions. They are average risk.

Answer 21

Standard risk

Question 22

individuals who meet certain requirements and qualify for lower premiums than the standard risk.

Answer 22

Preferred risk

Question 23

applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits.

Answer 23

Substandard (high exposure)risk

Question 24

Risks that the underwriters assess as not insurable are declined.

Answer 24

Declined risk

Question 25

life insurance arrangement in which a person with no relationship to the insured (a “stranger”) purchases a life policy on the insured’s life with the intent of selling the policy to an investor and profiting financially when the insured dies.

Answer 25

Stranger oriented life insurance

Question 26

violate the principle of insurable interest, which is in place to ensure that a person purchasing a life insurance policy is actually interested in the longevity rather than the death of the insured.

Answer 26

Stoli (stranger oriented life insurance)

Question 27

is another name for a STOLI, where a third-party investor who has no insurable interest in the insured initiates a transaction designed to transfer the policy ownership rights to someone with no insurable interest in the insured and who hopes to make a profit upon the death of the insured or annuitant.

Answer 27

Invested own life insurance

Question 28

explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies.

Answer 28

Buyers guide

Question 29

a written statement describing the features and elements of the policy being issued. also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years.

Answer 29

Policy summary

Question 30

means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

Answer 30

Illustration

Question 31

Know this

Answer 31

No premium no coverage

Question 32

The purpose of the Act is to address social, economic, and global initiatives to fight and prevent terrorist activities.

Answer 32

USA patriot act

Question 33

require banks, broker-dealers, and other financial institutions to establish new anti-money laundering (AML) standards.

Answer 33

Finacial crime enforcement network

Question 34

state that procedures and plans must be in place and designed to identify activity that one would deem suspicious of money laundering, terrorist financing and/or other illegal activities

Answer 34

Suspicious Activity Reports (SARs) Rules

Question 35

requires 2 disclosures to a customer (a consumer who has an ongoing financial relationship with a financial institution):

When the customer relationship is established (i.e., a policy is purchased); and
Before disclosing protected information.

Answer 35

Gramm leach billet act