Chapter 12

Question 1

what is mortality risk?

Answer 1

the likelihood that a person will die sooner than statistically expected.

Question 2

define underwriting

Answer 2

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

Question 3

what is an underwriter

Answer 3

an insurance company employee who evaluates risks, accepts, or declines insurance application and determines the appropriate premium rate to charge acceptable risks.

Question 4

define the term risk class

Answer 4

a group of insureds who represent a similar level of risk to an insurance company.

Question 5

what is new business processing?

Answer 5

includes all the activities required to process applications for insurance products evaluate the risks associated with applications for life insurance and irssu policies

Question 6

in some insurance companies, are sales and marketing acitivities also considered part of new business processing?

Answer 6

yes

Question 7

what is a click-wrap?

Answer 7

a process where the person clicks a secure, I agree or accept, button on the electronic document.

Question 8

what checks must an application go through before being underwritten?

Answer 8

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.

Question 9

the main goal of many insurers is to achieve straight through processing (STP). Define this

Answer 9

the electronic processing of every step in the new business process without manual intervention.

Question 10

Annuities are not underwritten, but typically go through a similar process. Name the steps.

Answer 10

1. identify customer needs
2. generate annuity illustrations
3. submit application
4. check for suitability,
5. generate pending contract

Question 11

what is suitability?

Answer 11

refers to where a particular insurance or annuity product is an appropriate purchase for an applicant based on the applicants needs and financial condition.

Question 12

what is the purpose of verifying suitability?

Answer 12

the insurer attempts to reinforce tryst and loyalty.

Question 13

what are the 3 responsibilities of the new business and u/w operations?

Answer 13

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.

Question 14

what is a jet unit?

Answer 14

A team authorized to immediately approve individual insurance applications that satisfy certain minimum qualifications.

Question 15

What is the purpose of the cheif underwriter

Answer 15

manages underwriting department,

establishes u/w philosophy, g/l and producers,

Question 16

what does the medical u/w director do?

Answer 16

updates company’s u/w standards

provides assistance to u/w concerning proposed insurers who have complex medical hx

Question 17

what is antiselection?

Answer 17

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

Question 18

define persistency in terms of u/w

Answer 18

the retention of business that occurs when a policy remains in force.

Question 19

What is an insurer’s underwriting philosophy?

Answer 19

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.

Question 20

define underwriting guidelines.

Answer 20

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.

Question 21

Name the four typical underwriting risk classes

Answer 21

1. preferred
2. standard
3. substandard
4. decline.

Question 22

describe the underwriting process in 3 steps.

Answer 22

1. field underwriting or teleunderwriting
2. gathering additional information as needed
3. making a decision.

Question 23

what is the action of rating?

Answer 23

the process of approving an application but at a higher-than-average premium rate or with a modified type or amount of coverage.

Question 24

what is field underwriting?

Answer 24

when producers gather initial information about applicants and proposed insureds.
- aids in saving time and money

Question 25

what is the purpose of a field underwriting manual?

Answer 25

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

Question 26

Define evidence of insurability

Answer 26

the documentation that the proposed insured appears to be an insurable risk.

Question 27

take table/chart specifics the kinds of informaiton needed to assess the insurability of a propsed insured?

Answer 27

table of underwriting requirements.

Question 28

define tele-underwriting

Answer 28

a method by which a home office employee or vender rather than the producer, gathers most of all of the information needed for underwriting.

Question 29

What is a nonmedical supplement or AKA statement of health (SOH)

Answer 29

contains the proposed insureds answers to medical history questions recorded by a producer or teleunderwriter at the time of application.

Question 30

what is a paramedical report?

Answer 30

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.

Question 31

What is a medical report?

Answer 31

the report of the insured's health that both the proposed insured and a physician complete.

Question 32

What is the role of MIB in underwriting?

Answer 32

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.

Question 33

What is an APS?

Answer 33

a report by a physician who has treated or is currently treating the proposed insure .

Question 34

what are the additional commonly ordered labratory tests?

Answer 34

- urinalysis - blood chemistry - EKG/ECG - saliva

Question 35

What is the purpose of financial underwriting?

Answer 35

its an asset to determine 1. needs 2. relationships between the need for coverage and amount applied for 3. affordable

Question 36

What are generally accepted financial needs for purchasing personal life insurance?

Answer 36

income protection estrate planning charitable contributions

Question 37

What is personal underwriting?

Answer 37

analyzes life style choices that can significant affect the mortality of a persons life.

Question 38

What 3 factors of life are underwriting for personal life insurance

Answer 38

1. financial 2. medical 3. personal (lifestyle)

Question 39

How does the numerical rating system work?

Answer 39

uses debits and credits, depending on favourable or unfavourable mortality assessments. - start with base 100 and add usually + credits, and - debits

Question 40

an underwriters level of authority is specified by what?

Answer 40

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

Question 41

What is an audit log?

Answer 41

a record of work completed. Audit logs are feedback controls to make sure employees follow all the proper procedures on each case. `

Question 42

Name some internal customers that may collaborate with underwriters?

Answer 42

``` actuaries markerting staff resinsurance staff compliance staff legal staff claim staff accounting staff IT staff customer service staff ```

Question 43

How is group underwriting different from individual life insurance u.w

Answer 43

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.

Question 44

What are the goals of group underwriting?

Answer 44

1. determine level of risk a group of people represent | 2. charge premium for group coverage appropriate for the group

Question 45

what is the NAIC group insurance model act?

Answer 45

defines the types of groups eligible for group life insurance and sets forth provisions that group insurance policies must contain.

Question 46

Who are group representatives (in terms of group insurance)

Answer 46

salaried insuraince company employees specifically trained in the techniques of markerting and serviging group products, market most group policies.

Question 47

Define the group underwriting process in 5 steps

Answer 47

1. request for proposal 2. proposal for insurance 3. master application 4. master group insurance contract 5. certificate of insurance.

Question 48

define a certificate of insurance

Answer 48

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

Question 49

Define the master group insurance contract

Answer 49

a legal document that certified the relationship between the insurer and the group policyholder and specifies the contracts benefits.

Question 50

who are parties to the master group insurance contract?

Answer 50

only the insurer and the group policyholder, not the group insured.

Question 51

who are group insured?

Answer 51

members who are covered by the insurance contract

Question 52

what characteristics are evaluated by a group underwriter for group insurance?

Answer 52

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.

Question 53

Law generally permit insurers to discriminate among risks along as u/w base their decision on?

Answer 53

1. recognized actuarial principals | 2. the insurer's own actual or reasonably anticipated experience.

Question 54

What does the Fair Credit Reporting Act regulate? (FCRA)

Answer 54

the reporting and use of consumer information, and seeks to ensure that consumer reports only contain accurate, relevant and recent information.

Question 55

what is a consumer reporting agency?

Answer 55

a private business that assembles or evaluates information on consumers and furnishes consumer reports to other people and organizations in exchange for a free.

Question 56

Define the Gramn-Leach-Bliley (GLB) act

Answer 56

a federal law that requires insurance companies to respect customers privacy to protect the security and confidentiality of those customers nonpublic personal information.

Question 57

What is the NAIC model privacy act?

Answer 57

a model law that establishes standards for the collection, use and disclosure of information gathered in connection with insurance transactions.

Question 58

In canada; what is the purpose of the federal personal information protection and electronic department act? (PIPEDA)

Answer 58

it governs the collection, use, and disclosure of personal information by organizations int he private sector.

Question 59

which provinces are not governed by the PIPEDA?

Answer 59

quebec, BC and alberta, where similar provincial privacy laws apply.