Flashcards in Chapter 12 Deck (59):
what is mortality risk?
the likelihood that a person will die sooner than statistically expected.
the process of assessing and classifying the degree of risk a proposed insured or group represent and making a decision to accept of decline that risk
what is an underwriter
an insurance company employee who evaluates risks, accepts, or declines insurance application and determines the appropriate premium rate to charge acceptable risks.
define the term risk class
a group of insureds who represent a similar level of risk to an insurance company.
what is new business processing?
includes all the activities required to process applications for insurance products evaluate the risks associated with applications for life insurance and irssu policies
in some insurance companies, are sales and marketing acitivities also considered part of new business processing?
what is a click-wrap?
a process where the person clicks a secure, I agree or accept, button on the electronic document.
what checks must an application go through before being underwritten?
1. ensure application used is the correct form for the issuing juristiction
2. application is complete and accurate
3. the producer who submitted the application is properly licensed and appointed.
the main goal of many insurers is to achieve straight through processing (STP). Define this
the electronic processing of every step in the new business process without manual intervention.
Annuities are not underwritten, but typically go through a similar process. Name the steps.
1. identify customer needs
2. generate annuity illustrations
3. submit application
4. check for suitability,
5. generate pending contract
what is suitability?
refers to where a particular insurance or annuity product is an appropriate purchase for an applicant based on the applicants needs and financial condition.
what is the purpose of verifying suitability?
the insurer attempts to reinforce tryst and loyalty.
what are the 3 responsibilities of the new business and u/w operations?
1. assessing degree of risk a proposed insured represents
2. assigning the risk to an appropriate risk class
3. issuing a policy if the risk is accepted.
what is a jet unit?
A team authorized to immediately approve individual insurance applications that satisfy certain minimum qualifications.
What is the purpose of the cheif underwriter
manages underwriting department,
establishes u/w philosophy, g/l and producers,
what does the medical u/w director do?
updates company's u/w standards
provides assistance to u/w concerning proposed insurers who have complex medical hx
what is antiselection?
the tendency of people who believe they have a greater-than-average likeligood of loss to seek insurance protection to a greater extent than do those who believe they have an average or less than average likelihood of loss
define persistency in terms of u/w
the retention of business that occurs when a policy remains in force.
What is an insurer's underwriting philosophy?
a set of objectives for guiding all of an insurer's underwriting actions.
generally reflects the insurer's strategic business goals and includes its pricing assumptions for its products.
define underwriting guidelines.
these are the standards that specify the limits within which proposed insured's may be assigned to one of an insurer's risk classes established for each insurance product.
Name the four typical underwriting risk classes
describe the underwriting process in 3 steps.
1. field underwriting or teleunderwriting
2. gathering additional information as needed
3. making a decision.
what is the action of rating?
the process of approving an application but at a higher-than-average premium rate or with a modified type or amount of coverage.
what is field underwriting?
when producers gather initial information about applicants and proposed insureds.
- aids in saving time and money
what is the purpose of a field underwriting manual?
present specific information that guides a producer in assessing th risks a proposed insured represents and assembling and submitting the application as well as any required evidence of insurability
Define evidence of insurability
the documentation that the proposed insured appears to be an insurable risk.
take table/chart specifics the kinds of informaiton needed to assess the insurability of a propsed insured?
table of underwriting requirements.
a method by which a home office employee or vender rather than the producer, gathers most of all of the information needed for underwriting.
What is a nonmedical supplement or AKA statement of health (SOH)
contains the proposed insureds answers to medical history questions recorded by a producer or teleunderwriter at the time of application.
what is a paramedical report?
contains the proposed insured's answers to medical history questions recorded by a paramedical examiner, and 2 the results of an examination that a paramedical examiner conducts.
What is a medical report?
the report of the insured's health that both the proposed insured and a physician complete.
What is the role of MIB in underwriting?
its a not-for-profit membership corporation established to provide coded information to insurers in Canada and the US about medical conditions that applicants have disclosed or other insurance companies have detected in connection with previous applications for insurance.
What is an APS?
a report by a physician who has treated or is currently treating the proposed insure .
what are the additional commonly ordered labratory tests?
- blood chemistry
What is the purpose of financial underwriting?
its an asset to determine
2. relationships between the need for coverage and amount applied for
What are generally accepted financial needs for purchasing personal life insurance?
What is personal underwriting?
analyzes life style choices that can significant affect the mortality of a persons life.
What 3 factors of life are underwriting for personal life insurance
3. personal (lifestyle)
How does the numerical rating system work?
uses debits and credits, depending on favourable or unfavourable mortality assessments.
- start with base 100 and add usually + credits, and - debits
an underwriters level of authority is specified by what?
1. the maximum coverage amount that the underwriter can approve
2. the degree to which the underwriter may rate or decline an insurance application without the approval or review of a more exprienced u/w
What is an audit log?
a record of work completed. Audit logs are feedback controls to make sure employees follow all the proper procedures on each case. `
Name some internal customers that may collaborate with underwriters?
customer service staff
How is group underwriting different from individual life insurance u.w
group u/ws evaluates information about the composition of and the risk present by the group as a whole, rather than evaluating information about individual group members.
What are the goals of group underwriting?
1. determine level of risk a group of people represent
2. charge premium for group coverage appropriate for the group
what is the NAIC group insurance model act?
defines the types of groups eligible for group life insurance and sets forth provisions that group insurance policies must contain.
Who are group representatives (in terms of group insurance)
salaried insuraince company employees specifically trained in the techniques of markerting and serviging group products, market most group policies.
Define the group underwriting process in 5 steps
1. request for proposal
2. proposal for insurance
3. master application
4. master group insurance contract
5. certificate of insurance.
define a certificate of insurance
a document that describes the coverage that the master group insurance contract provides to the group insured and the group insured's rights under the contract
Define the master group insurance contract
a legal document that certified the relationship between the insurer and the group policyholder and specifies the contracts benefits.
who are parties to the master group insurance contract?
only the insurer and the group policyholder, not the group insured.
who are group insured?
members who are covered by the insurance contract
what characteristics are evaluated by a group underwriter for group insurance?
1. group risk
2. proposed group coverage
ie. size, age and sex distribution and group's prior coverage and claim experience.
- characteristics of the proposed group coverage include eligibility requirements, benefit levels method of plan administration and mode of commission payments.
Law generally permit insurers to discriminate among risks along as u/w base their decision on?
1. recognized actuarial principals
2. the insurer's own actual or reasonably anticipated experience.
What does the Fair Credit Reporting Act regulate? (FCRA)
the reporting and use of consumer information, and seeks to ensure that consumer reports only contain accurate, relevant and recent information.
what is a consumer reporting agency?
a private business that assembles or evaluates information on consumers and furnishes consumer reports to other people and organizations in exchange for a free.
Define the Gramn-Leach-Bliley (GLB) act
a federal law that requires insurance companies to respect customers privacy to protect the security and confidentiality of those customers nonpublic personal information.
What is the NAIC model privacy act?
a model law that establishes standards for the collection, use and disclosure of information gathered in connection with insurance transactions.
In canada; what is the purpose of the federal personal information protection and electronic department act? (PIPEDA)
it governs the collection, use, and disclosure of personal information by organizations int he private sector.