Chapter 3

Question 1

What is the new business process?

Answer 1

1) gathers data and enters it into an administration system
2) assesses the data
3) acquires additional data if needed
4) decides whether to accept the risk
5) if the decision is favourable, issues the policy.

Question 2

what is field underwriting

Answer 2

is the practice of athering initial information about applicants and proposed insureds and screening proposed insureds to detemine if they are likely to be approved for a specific type of coverage.

Question 3

what are characteristics of effective field underwriting?

Answer 3

1. reduces the insurer’s cost by eliminating the processing and underwriting of applications that are clearly unacceptable.
2. helps ensure that underwriters have the info they need to assess risk
3. set reaistic expectations for applications by helping them apply for an appropriate coverage amount.

Question 4

Traditional insureers divide application into two parts.

Answer 4

Non-medical information
medical information
- but this is changing

Question 5

What is tele-underwriting

Answer 5

a method by which someone other than a financial professional gathers information needed for underwriting and insurance application.

Question 6

What are examples of non-medical infomation on insurance applications?

Answer 6

1. name, social security number, DOB, DOB, A, S, L, address, tele number, occupation, emplouer, income,
2. applicants/ownership details
3. insurance plance, faceamount, premiums
4. divident options
5. bene info
6. acocations, aviation, residency/travel, driving, SM hx, criminal hx.
7. insurance hx

Question 7

Some application sections contain a section for the advisor to complete. What kind of questions do they ask?

Answer 7

1. how well do u know the insured
2. what is your impression
3. was it completed F2F
4. did you solicit the business
5. whats the purpose of insurance
6. is it a replacement policy

Question 8

Most insurers have a field underwriting manual. What is this?

Answer 8

a paper or online document that 1) presents specific guidance for a financial professionals assessment of the risk that a proposed insureds represent
2) guides the financial professional in assembling and submitting the application and in shjaring any other information needed for the underwriter to evaluate the risl.

Question 9

What is usually included in the insurer’s field underwriting manual?

Answer 9

1. underwriting philosophy - set of g/l for an insurers u/w actions, the stratefic busines goals, and pricing assumptions for products.
2. age and amount requirements chart -
3. impairement guide

Question 10

Define an impairement

Answer 10

a physical or psychological abnormality or loss of funtion.

Question 11

What are some typical content of a field underwriting manual?

Answer 11

underwriting philosophy
A&A reuqirment
impairement g/l
outline of financial responisbilities and compliance issues
speicific guidance on completing applications and changes
brief definitions of common medical terms and common impairments
list of questions related to common impairemetns
criteria for preferrred rating
criteria for qualifying as a NS

Question 12

What are remote applcations?

Answer 12

applications that isnurers accept from financial professionals who meet with clients over the phone or over videoconferencing platforms.

Question 13

what is an electronic application system?

Answer 13

allows financial professionals to enter application information into a computer rather than on paper and transmit the infomration to the insurer over a company network

Question 14

What is a reflexive question?

Answer 14

question that triggers additional, more probing questions related to the original question.

Question 15

those who accept electronic applications also accept electronic signatures. What is this?

Answer 15

unique personal identifiers that make legally binding contract using electronic communications media.

Question 16

Temporary insurance coverage during UW period depends on the premium receipt. define this.

Answer 16

the insurers issue to the applicant fo r alife insurance policy in exchange for payment for the first premium. Usually includes a TIA

Question 17

What is a temporary insurance agreement (TIA)?

Answer 17

a contract between the insure and ht epaplicant that provides temporary coverage on the proposed insured before a policy is issued and delivered.

Question 18

What is a suitability requirement?

Answer 18

a regulatory requirment that imposes a duty on financial professionals and insurers to have a reasonable grounds on which to believe a recommended product is suitable for a customer’s financal situation and to purchase objectives.

Question 19

After evaluating the degree of risk represented bya proposed insured, the UW can take what actions?

Answer 19

1. accept the risk and issue as applied for
2. accept the risk but rate the policy.
3. accept the risk but offer lower Faceamount
4. accept the risk, but limit coverage by modifying the terms of the contract.
5. decline the risk not issue the policy
6. PP making a decison at this time.

Question 20

What is rating?

Answer 20

the process of increasing the premium rate for a higher-than-average risk in order to approve the risk.

Question 21

What is an exclusion

Answer 21

a policy provision that describes circumstances under which the insurer will not pay the policy benefit following and otherwise covered loss.

Question 22

What is a policy rider

Answer 22

an amendment to an insurance policy that becomes part of the insurance contract and either expands or limits the benefits payable under the contract.

Question 23

define policy issue

Answer 23

the process of preparing the insurnace contract and delivering the policy to the policyowner.

Question 24

What happens during policy issue?

Answer 24

Staff

1. enter or confirm the policy rating and other other information in the admin system
2. notify the financial professional of the UW decision
3. verify the insurer has received the intial premium payment and all policy requirments have been met
4. print and bind the policy with any forms required.
5. mail policy

Question 25

What are insurers regularly monitoring in order to assure performance of the NB and UW area is up to standards.

Answer 25

1) performing every step of UW accurately 2) evaluate applications faily and promptly

Question 26

What is an underwriting worksheet?

Answer 26

a document that contains records of telephone calls, letters, and other communications; doumentation of request for reinsurance; list of reports and other information requested; and other notations that explain clearly the manner in which the underwriter has handled the case, with submission of the application to the insurer.

Question 27

Why does u/w documentation need to be complete and accurate?

Answer 27

it might be used: 1. by other company staff 2. evidence in court proceeding 3. to explain unusual or exceptional handling of cases to internal auditors.

Question 28

Insurers often sue audits to monitor the quality of their underwriting activities. whats an audit?

Answer 28

an evaluation of a comapny;s records and operations to ensure the accuracy of the records and the effectiveness of operational policies and proceedures.

Question 29

What is the purpose of an UW audit

Answer 29

1) make sure that appropriate and consistent decisions are being made 2) complying with applicable laws and regulations 3) documenting casses clearly and completely

Question 30

What is the difference between internal audits and external audits?

Answer 30

internal: audits performed by a company;s own staff to ensure that they have accurate records and effective procedures and policies - judge quality of work External: audits conducted by third party that is not employed by the company being audited - usually reinsures on insurers

Question 31

Name some examples of time and service metrics

Answer 31

1. time to underwriter 2. time to underwrite case 3. total time to issue 4. time for delivery requirements 5. total turnaround time.

Question 32

Define Risk assessment

Answer 32

the process of determining the degree of risk represented by each proposed insured using a number of factors established when the insurance product was designed and proced.

Question 33

Risk assessment is primarily concerned with mortality. Define this.

Answer 33

the incidence of death amoung a specified group of people

Question 34

What is mortality rate?

Answer 34

the rate at which death occurs amoung a specified group of people during a specific period, typically one year.

Question 35

What is morbidity?

Answer 35

the incidence rate of sickness and injuryt amount a specific group of epople

Question 36

what is morbidity rate

Answer 36

the rate at which sickness or injury occurs amoung a specified group of people during a specified period.

Question 37

What is risk-factor, in terms of individual insurance UW?

Answer 37

any aspect of a proposed insured's present health, medical hx, fx, pmh, fiancnials, MVVR, criminal, occupaiton and avocations that increase risk.

Question 38

Define medical risk facts

Answer 38

pysicial or psychological characteristics that my affect a person's health and longevity.

Question 39

What is a personal risk factor?

Answer 39

lifestyle choices that significantly affect a person's health of longevity

Question 40

What is a financial risk factors?

Answer 40

financial information that an UW considers to determine whether a person is applying for more insurance than reasonably needs/can afford.

Question 41

Define antiselection

Answer 41

the tendency of people who believ ehtey have a greater-than-average likelihood of loss to seek insurance protection to a greater extent than do those who beleiv ehtey have an average or less than average likelyhood of a loss.

Question 42

What is a wagering agreement?

Answer 42

any agreement under which either party may gain or lose depending on the outcome of an uncertain event.

Question 43

What is an insurable interrest?

Answer 43

exists when a person is likely to suffer a genuine financail loss or detriment should the event insured against occur.

Question 44

define misrepresentation

Answer 44

An untrue statement in an insurance application.

Question 45

What is material misrepresentation?

Answer 45

a misrepresentation that induces the other party, the insurer- to nter into a contract that it would not have entered had it known the truth.

Question 46

What is a rescision?

Answer 46

a legal remedy provided to an insurer to avoid a contract when the policy was issued based on a material misrepresentation of a fact contained int the application.

Question 47

Insurers are limited in their right to rescind policies by a policy's contestable period. what is this?

Answer 47

A period in within which the insurer has the right to avoid a life insurance policy on the grounds of a material misreprecentations.

Question 48

what is an incontestability provision?

Answer 48

life insurance policy provision that limits the time within which an insurer has the right to avoid a life insurance policy on the basis of material misrepresentation int eh application.

Question 49

What is Moral hazard?

Answer 49

a characteristic that exists when the reputation, financial position, or criminal record of an application or proposed insured indicates that the person may act dishonestly in the insurance transaction.

Question 50

When is discreimination among risks considered lawfully?

Answer 50

1. recognized acturial pronciples | 2. actual or resonably anticipated experience.

Question 51

U.S. jurisdictions have enacted laws that prohibit hinsurers from using what factors in their UW criteria?

Answer 51

1. gender 2. material status 3. sexual orientation 4. blindless 5. status as a victim of physical abuse 6. race.

Question 52

What is a rick cloass?

Answer 52

a group of insured in a given age category who represents a similar level of risk to an insurance company. - charged same premium rate.

Question 53

Most insurers identify risk classes as 1. preferred 2. standard 3. substandard 4. declined - define preferred class

Answer 53

person whos motality rates are lower than average and present the lowest degree of mortality risks. - healthy

Question 54

Most insurers identify risk classes as 1. preferred 2. standard 3. substandard 4. declined - define standard class

Answer 54

persons who anticipated mortality rates are average.

Question 55

Most insurers identify risk classes as 1. preferred 2. standard 3. substandard 4. declined - define substadnard

Answer 55

persons who anticipated mortality rates are higher than average but still considered insurable - ++ premiums

Question 56

Most insurers identify risk classes as 1. preferred 2. standard 3. substandard 4. declined - define declined

Answer 56

person's whose anticipated mortality rates are so great the insurer cannot provide coverage at an affordable cost or the mortality risk cannot be predicted

Question 57

UW bear the responsibility of assessing and classifying risks appropriately to ensure what?

Answer 57

1) each insured is placed in the appropriate risk class | 2) the insures claim experience is as close as possible tothe assumed loss rate used to establish the premium rates.

Question 58

What are UW guidelines?

Answer 58

general standards that UW follows as they established the level of risk presented by a proposed insured or group.

Question 59

Name some examples of medical risk factors

Answer 59

1. age 2. height and wieght 3. BP 4. lipids 5. specific impairments 6. medical hx 7. fx

Question 60

name some examples of personalo risk factors

Answer 60

1. occupation 2. smoking 3. substance us 4. MVR 5. avocations

Question 61

name some exmaples of financial risk factors

Answer 61

1. financial circumstances 2. type/amount of coverage 3. purpose of insurance

Question 62

group life insurance UW focuses on what areas/factors relating to the group ?

Answer 62

1. size 2 nature of business 3. employee occupational classes 4. type and amount of coverage requested.

Question 63

What is industry experience?

Answer 63

the collective data about insurance claim experience generated by industry-wide studies?

Question 64

When is a policy considered undeliverable?

Answer 64

when an applicant chooses not to accept a policy when a financial professional attempts to deliver it.

Question 65

How do u/w form a productive relationship with financial professions'/.

Answer 65

1. completing work on each application as quickly as possible 2. assessing each application ina consistent manner 3. providing updates on progress in cases that are delayed because of requirements for additional information 4. communicating with financial professionals about raiting, modifying, or declining an application. 5. educating fiancnail professionals and their staff about the insurer's underwriting philosophy and g/l.

Question 66

Cheif underwriter is the highest ranking u/w in an insurance company. What are their responsibilities?

Answer 66

1. esablishing the insurer's u/w philosophy g/l 2. monitoring the cost and quality of UW 3. assisting with UW large or unusally difficult cases. 4. helping to negotiate and administer reinsurance agreements 5. deciding which products, services, and vendors to use 6. overseeing the training of all UW 7. reviewing contestable claims

Question 67

Chief UW also serves as a liaison wiht the insurer's other operational areas, which include what?

Answer 67

1. legal/compliance staff to create contract wording 2. information techonolgy staff to develop u/w systems 3. actuarial staff to establish appropriate pricing, preferred risk criteria and other characteristics.

Question 68

What is an underwriters autority level based on? (2)

Answer 68

1. max coverage amount that the UW can approve | 2. degree to which the UW may rate or decline a policy without approval or review by a more experienced UW

Question 69

What is the purpose of a referral person?

Answer 69

1. ensure that appropriateness of the OG decision 2. ensure the consistency of UW actions 3. evaluate the UW job performance 4. train the UW 5. enhance financial professionals' confidence in the insurer's UW practices.

Question 70

What is a case assignment system?

Answer 70

method of assigning cases to UW based on characteristics of the case. - depends on insure's size, number of apps, and difficulty of cases.

Question 71

Case assignment systems typically assign cases to UW according to one or more characteristics. What are the exmaples?

Answer 71

1. type of application or policy change 2. geographic origin 3. financial professional submitting the aplication

Question 72

What is a work division system?

Answer 72

a method of assigning cases to UW that divides casses according to the person or group that UW them.

Question 73

What are the examples of work division systems?

Answer 73

1. independent UW 2. Team UW 3. committee UW

Question 74

What is automated UW?

Answer 74

type of UW in which techonology performs some or all of the steps needed to assess and classify insurance risks.

Question 75

What is STP

Answer 75

straight through processing. | All steps from application to policy issue are completed electronically

Question 76

What is an advantage to automated UW?

Answer 76

1. reduce costs by increasing efficiencies 2. reduce time from receipt of application to policy issue 3. decreased errors from human mistakes 4. improve UW consistency and quality 5. better satisfy fianncial professionals and cutomers with faster service 6. Allows UW to focus on complex risks.

Question 77

What is application triage?

Answer 77

automated UW approach that allows applicants to obtain coverage at the same price they would pay under a standard fully underwritten approach byt in less time. - rely on predictive analytics.

Question 78

What are two technology systems used to facilitate automated underwriting

Answer 78

1. BRE- business rules engines, automates decision-making process by creating and applying rules to all available situations. 2. predictive analytics - enables insures to evaluate a wide range of applicant data- and use the data to produce models that better predict a persons mortlaity risk.

Question 79

what is simplified UW?

Answer 79

only a few key risk factors are considered in assessing and classifying an insurance risk. - typically used for guaranteed issue policies. - quick / $$$

Question 80

What do insurers do in simplified uw?

Answer 80

1. ask a small number of risk-related questions 2. interview applicants by phone for more questions if needed 3. check external data bases that track potential risk factors.

Question 81

What is real time underwriting?

Answer 81

technology performs all the steps needed to assess and classify the insurance risk, and the insurers can make decisions instantly while the applicant waits. - not offered with every company but becoming more populoar.