Chapter 5

Question 1

What universal key concepts should be kept in mind that provide an appropriate frame of reference when considering post issue policy changes.

Answer 1

1. Contractual versus non-contractual policy provisions.
2. Change in amount at risk.
3. Insurability
4. Anti-selection.
5. Customer/producer/company.

Question 2

Although they are the contractual right of the policy, owner post issue ownership and beneficiary changes have begun to receive additional scrutiny because of what?

Answer 2

Life settlements, and stranger owned life insurance transactions

Question 3

What are some post issue changes to the policy contract that are non-contractual that companies will permit?

Answer 3

Face amount increases, tobacco to non-tobacco changes ,and risk reclassifications from sub standard to standard or even from standard to preferred.

Question 4

What factors are considered when reviewing the customer/producer/company impact of considering post issue policy changes.

Answer 4

1. Demographics of the market the insurer targets
2. Type of producer relationship (captive versus broker).
3. Business structure of the insurer (stock vs mutual company).
4. Company philosophy

Question 5

What post issue policy changes that commonly occurred do not require underwriter review?

Answer 5

Address changes, name changes due to marriage or divorce, modal premium changes, beneficiary, and or ownership changes (in many cases), the exercise of a guaranteed insurability rider, and the conversion of a term policy.

Question 6

Do post issue policy changes usually issue in more premium for the insurer or less?

Answer 6

They can result in lesser premiums as when rating reductions are allowed

Question 7

Post issue policy changes. Generally, business that has been reinsured on an automatic basis will have a reinsurance, treaty provision permitting what?

Answer 7

The seating company to independently make decisions necessary to process the post issue policy change. Reinsurance still needs to be notified of any changes.

Question 8

Post issue policy changes. Facultatively reinsured business - who makes the final decision

Answer 8

The reinsurer

Question 9

What are re-entries?

Answer 9

Term insurance policies that have reached the end of their period of specified coverage and are being considered for renewal.

Question 10

What is a 1035 internal exchange?

Answer 10

The IRS allows you to exchange an insurance policy that you own for a new life insurance policy, ensuring the same person without paying tax on the investment gains earned on the original contract.

Question 11

What are reinstatements?

Answer 11

The process by which a life insurance company puts back in force a life insurance policy that is either one been terminated
Because of nonpayment of renewal, premiums or two been continued under the extended term or reduced paid up insurance nonforfeiture option

Question 12

What factors do reinstatements depend on?

Answer 12

1. Whether or not the policy was facultative Klie reinsured.
2. Policy face amount.
3. Current policy values
4. Age of the proposed insured.
5. Duration policy had been in force.
6. Duration it had been lapsed.
7. Whether or not there have been a prior lapses and reinstatement of the same policy.
8. Disclosed health history on the reinstatement application.

Question 13

Non-medical substandard reductions include cases that were rated for what?

Answer 13

Occupation, aviation, avocation, and foreign travel or residence

Question 14

What are two types of policy changes that can be exercised at the discretion of the policy owner and that historically have not required underwriting?

Answer 14

Ownership and beneficiary changes