1
Q
What is the definition of a standard risk in life insurance?
A
The best risk class available, with mortality rates developed from this baseline
Prior to preferred risk underwriting, the life insurance industry offered standard and substandard mortality risk classes.
2
Q
What are the two types of substandard risk classes?
A
- Mortality loads (multiples applied to the baseline)
- Flat extras added to the baseline
These classes are used to assess risks that are not considered standard.
3
Q
What is the difference between preferred risk classes and residual standard risk classes?
A
- Preferred risk classes have lower mortality assumptions
- Residual standard risk classes have higher mortality assumptions
As better mortality risks are placed into preferred classes, the remaining risks exhibit higher mortality.
4
Q
What is the term used for the old standard class after preferred risks have been removed?
A
Aggregate standard
This term refers to the sum of the preferred and residual standard risk classes.
5
Q
Why did the life insurance industry introduce preferred risk classes?
A
To create a low-cost product
This was driven by the desire to compete on price and offer inexpensive coverage to price-sensitive consumers.
6
Q
How do preferred risks affect product pricing in life insurance?
A
They can be assigned favorable product pricing due to lower mortality
This allows insurance companies to offer competitive pricing.
7
Q
True or false: There is a single definition that consistently describes a preferred risk across the life insurance industry.
A
FALSE
Each insurance company creates its own unique risk criteria and pricing.
8
Q
What type of medical conditions are often described categorically in underwriting?
A
- Conditions present within two years of application receive a rating
- Conditions present more than two years ago receive no rating
Underwriting manuals contain categorical ratings for various impairments.
9
Q
What numerical factors are used for further risk stratification in preferred classes?
A
- Blood pressure
- Cholesterol
- BMI
These factors allow for more detailed risk assessment compared to many categorical ratings.
10
Q
What is the normal range for systolic blood pressure (SBP) as defined by the JNC 7 report?
A
Less than 120/80
The JNC 7 report published in 2003 revised the definition of normal blood pressure.
11
Q
What is defined as prehypertension according to the JNC 7 report?
A
BP of 120-139/80-89
These definitions categorize blood pressure levels and their associated risks.
12
Q
True or false: Death from ischemic heart disease and stroke increases progressively from BP levels as low as 115 mmHg systolic.
A
TRUE
The JNC 7 report indicates that risk increases linearly with lower blood pressure levels.
13
Q
The Framingham Heart Study began in what year?
A
1948
This study was initiated to identify risk factors associated with coronary artery disease.
14
Q
What was the original number of participants in the Framingham Heart Study?
A
5,209
Participants were selected from the town of Framingham, Massachusetts.
15
Q
What is the purpose of the Framingham Heart Study?
A
To identify risk factors for coronary artery disease (CAD)
The study continues to monitor and refine risk factors over time.
16
Q
What additional group was created in 1971 as part of the Framingham Heart Study?
A
Offspring Study
This group included 5,124 children of the original cohort.
17
Q
What type of examination did participants of the Framingham Heart Study undergo?
A
- Medical history
- Physical measurements
- Blood pressure
- Resting electrocardiogram (EKG)
- Chest x-ray
- Blood chemistries
These examinations aimed to identify predictive variables for heart disease.
18
Q
What is the significance of negative numbers in the context of risk assessment?
A
Reflect lower risk
This concept is similar to debits and credits in underwriting.
19
Q
How does blood pressure risk function according to the text?
A
As a continuous function
This applies to other factors like BMI and cholesterol as well.
20
Q
What was the goal of the Framingham Study?
A
To identify variables in routine medical exams that predict higher risk of developing coronary heart disease
The study aimed to provide insights for physicians regarding patient risk assessment.
21
Q
In which decade did the life insurance industry begin applying Framingham Study results to underwriting?
A
1970s
The research provided a foundation for preferred risk underwriting practices.
22
Q
What significant change occurred in the life insurance industry in the early to middle 1980s?
A
Increased use of blood testing to detect HIV and gather additional health information
This led to the creation of preferred risk classes.
23
Q
What is the purpose of multivariate regression in the context of the Framingham Study?
A
To quantify the influence of multiple risk factors on predicting heart disease
It helps separate the independent contributions of each risk factor.
24
Q
True or false: The Framingham researchers concluded that heart disease risk is caused by a single factor.
A
FALSE
They determined that heart disease risk is multifactorial, influenced by multiple variables.
25
Fill in the blank: The Framingham Study identified that as **body weight** increases, the presence of high blood pressure and high cholesterol generally _______.
increases
## Footnote
This relationship highlights the interconnectedness of obesity with other health risks.
26
What does it mean to 'control for' or 'adjust for' other risk factors in research?
To separate out and quantify the influence of each risk factor according to its own independent contribution to risk
## Footnote
This process is essential for accurate mortality measurement associated with specific risk factors.
27
What was a significant finding regarding **mortality risk** in the standard class by the mid-1970s?
There was a spectrum of mortality risk within the standard class
## Footnote
Coronary risk factors could be applied to standard risks.
28
What technological advancement in the 1980s aided the life insurance industry in acquiring health information?
Multiple-channel blood analyzers
## Footnote
These devices enabled more efficient blood testing and information gathering.
29
What is the **key concept** to understand in multivariate regression?
The role of the coefficient
## Footnote
The coefficient is a formula-generated number related to the variable it is predicting.
30
When employing **multiple regression**, what must be considered regarding the coefficients?
They have considered the other variables in play
## Footnote
This means controlling for other factors like blood pressure and cholesterol.
31
What is another term for **multiple variable regression**?
Multivariable or multivariate regression
## Footnote
This method correctly weights the importance of each individual variable.
32
True or false: The **multiple regression** method can predict outcomes using multiple variables.
TRUE
## Footnote
Multiple regression uses various input variables to predict a single outcome.
33
Who developed the **Cox proportional hazard model**?
Dr. David Cox
## Footnote
The model was developed in 1972.
34
What is the **most common form** of statistical analysis performed for mortality or survival work?
Cox proportional hazard model
## Footnote
This model is widely used in various fields, including epidemiology and life insurance.
35
When multiple predictor variables are used in a Cox model, it is referred to as a **________**.
multivariate Cox proportional hazard model
## Footnote
This allows for a more complex analysis of the hazard associated with different factors.
36
In the context of the **Framingham study**, what hazard is measured?
Hazard associated with developing heart disease
## Footnote
This study is significant for understanding cardiovascular risk factors.
37
In life insurance, the hazard measured by the Cox model is the risk of **________**.
dying
## Footnote
This application is crucial for underwriting decisions in the insurance industry.
38
What is a **proportional hazard** in the context of a light bulb?
The hazard of burning out
## Footnote
It works like underwriting debits and credits.
39
In a Cox model, what does a **hazard ratio (HR)** of 1.0 indicate?
No change in risk from referent baseline
## Footnote
Similar to standard being 100% of a baseline mortality table.
40
What does an HR greater than 1.0 signify?
Increased risk
## Footnote
Example: HR of 1.50 indicates a 50% increase in risk.
41
What does an HR less than 1.0 represent?
Better than standard risk
## Footnote
Example: HR of 0.90 indicates a 10% better than standard risk.
42
What is the primary consideration for the medical community in the Cox model?
Survival or time to failure
## Footnote
It considers both binary outcomes and time until the event occurs.
43
What type of model is used to predict glasses of lemonade sold?
Multiple variable linear regression model
## Footnote
It does not consider when the lemonade was sold.
44
What does the **Cox proportional hazard model** allow researchers to investigate?
Mortality for a medical condition or procedure over time
## Footnote
It adjusts for the confounding influence of other predictor variables.
45
What are the input variables in a Cox regression model referred to as?
Predictor variables or independent variables
## Footnote
They influence the target variable of interest.
46
What is the target variable in the context of the Cox model?
Heart disease, mortality, or glasses of lemonade sold
## Footnote
It is referred to as the dependent variable.
47
What does the regression coefficient in a Cox model define?
The proportional hazard associated with the input variable
## Footnote
It quantifies the unique individual influence of each risk factor.
48
What is the base used in the regression coefficients of a Cox model?
Base 'e' (natural logarithm)
## Footnote
The value is approximately 2.71828183.
49
True or false: A Cox model includes a y-intercept.
FALSE
## Footnote
Unlike other regression models, there is no y-intercept in a Cox model.
50
How can a **regression coefficient** be converted to a **hazard ratio (HR)** in Excel?
Type =exp(0.14)
## Footnote
This converts the regression coefficient of 0.14 to an HR of 1.15.
51
What is the **hazard ratio (HR)** for a regression coefficient of 0.14?
1.15
## Footnote
The HR indicates an increase in risk associated with the variable.
52
To convert an **HR** back into a regression coefficient, what function is used in Excel?
=ln(1.15)
## Footnote
This generates the regression coefficient of 0.14.
53
If cholesterol is considered a **continuous number**, what does a unit change in cholesterol result in?
An increase in risk of 1.15
## Footnote
This is similar to how changes in other variables affect outcomes.
54
In a Cox model, a **two-unit change** in cholesterol results in what increase in risk?
0.28
## Footnote
This is calculated by multiplying the regression coefficient by 2 (0.14*2).
55
What is the **HR** for a two-unit increase in cholesterol?
1.32
## Footnote
This is derived from exp(0.28) in Excel.
56
If cholesterol is **1 unit less** than the referent point, what is the HR?
0.87
## Footnote
This indicates a lower risk compared to the referent point of 1.0.
57
What does an HR of **0.76** indicate if cholesterol is **2 mg/dl lower** than expected?
Lower risk than the referent point
## Footnote
This is calculated as e(-0.28).
58
True or false: A **1 mg/dl increase** in cholesterol from any baseline produces the same HR.
TRUE
## Footnote
The HR remains consistent regardless of the starting point.
59
What is the **coefficient for cholesterol** used in the example?
0.14
## Footnote
This number is used for illustrative purposes and is not realistic.
60
What study published in **Hypertension** describes the relationship between **systolic blood pressure** and stroke mortality?
Relation between blood pressure and stroke mortality
## Footnote
The study states that the risk of stroke death increases by 1% for every 1 mmHg increase in untreated systolic blood pressure.
61
What does controlling for **age** in a study help measure?
The independent risk for stroke mortality associated with systolic blood pressure alone
## Footnote
As age increases, so does systolic blood pressure, which can confound results.
62
The article treats **systolic blood pressure** as a _______ for stroke mortality.
risk factor
## Footnote
This indicates that changes in systolic blood pressure are linked to changes in stroke mortality.
63
What is the **hazard ratio (HR)** for stroke mortality associated with a unit increase in systolic blood pressure for males?
1.014
## Footnote
This indicates a 1.4% increase in risk for each unit increase in systolic blood pressure.
64
For females, the HR for stroke mortality associated with a unit increase in systolic blood pressure is _______.
1.009
## Footnote
This indicates a 0.9% increase in risk for each unit increase in systolic blood pressure.
65
A **10 mmHg increase** in systolic blood pressure results in what percentage increase in risk for males?
14.92%
## Footnote
This is calculated from the HR of 1.014 raised to the power of 10.
66
True or false: The authors rounded the increase in risk for systolic blood pressure to **1%** in their summary.
TRUE
## Footnote
The authors summarized the increase in risk for both males and females to 1%.
67
In categorical data, the **referent group** is similar to what in underwriting?
standard risk class
## Footnote
This allows for comparison of other results to a baseline.
68
What is the **B-coefficient** for cholesterol levels <160 mg/dL?
-0.65945
## Footnote
This B-coefficient can be converted to a hazard ratio for risk assessment.
69
What is the **hazard ratio (HR)** for cholesterol levels between 160-199 mg/dL?
0.52
## Footnote
This indicates a lower risk compared to the referent group.
70
The **B-coefficient** for cholesterol levels of 200-239 mg/dL is _______.
0.00000
## Footnote
This serves as the baseline for comparison in the study.
71
What is the HR for cholesterol levels of 240-279 mg/dL?
1.19
## Footnote
This indicates an increased risk compared to the referent group.
72
The HR for cholesterol levels of 280+ mg/dL is _______.
1.66
## Footnote
This indicates a significantly higher risk compared to the referent group.
73
What was the upper limit of normal cholesterol set at in the 1970s?
300 mg/dl
## Footnote
This limit was commonly used in clinical laboratory forms during that time.
74
The Framingham study's use of the **Cox model** is primarily to identify risk for what condition?
heart disease
## Footnote
It does not directly translate into a cholesterol mortality table.
75
How did the Framingham researchers improve acceptance of their risk equations?
Converted hazard ratios to point values
## Footnote
This allowed the values to be summed for risk assessment.
76
In the Framingham point system, what do positive numbers represent?
increased risk
## Footnote
Negative numbers represent decreased risk.
77
What is the focus of Wilson's article regarding the point score?
Produces results as good as the regression equation
## Footnote
This emphasizes the effectiveness of the point scoring system.
78
What is the movement in the life insurance industry regarding underwriting?
Reduce reliance on physical measurements, blood, and urine testing
## Footnote
This shift is towards using publicly available data for quicker decisions.
79
What does **accelerated underwriting** refer to?
Faster underwriting decisions using publicly available data
## Footnote
This eliminates the need for medical examinations and fluid testing.
80
Name three examples of publicly available data used in underwriting.
* Driving history
* Criminal history
* Medical claims data
## Footnote
There are potentially thousands of attributes available for each person.
81
What is the fundamental message associated with the chapter regarding underwriting risk?
Many input variables are used to predict a mortality risk outcome
## Footnote
This reflects the big data age of underwriting risk.
82
What is the significance of **predictive analytics** in the context of the Framingham researchers?
Identifying risk factors for developing CAD since the 1940s
## Footnote
Framingham researchers used multiple variable regression to analyze a wide variety of variables.
83
What did the **Society of Actuaries** conduct prior to the 1990s?
Intercompany mortality studies on standard-issued insured lives
## Footnote
These studies were foundational for understanding mortality risk.
84
In the early to mid-1980s, how did the **advent of tobacco-distinct product pricing** change risk classification?
Standard became two separate risk classes: smokers and non-smokers
## Footnote
This change was reflected in the 1990-1995 Society of Actuaries intercompany mortality tables study.
85
What was the title of the **2002-2004 Individual Life Experience Report**?
Mortality under Standard Individually Underwritten Life Insurance
## Footnote
This report marked the first-time preferred mortality findings were reported.
86
How did the **2002-2004 Individual Life Experience Report** rank preferred risk classes?
Numerically ranked from 1 (lowest mortality risk) to higher numbers
## Footnote
Not all insurance companies had the same number of preferred risk classes.
87
What is the relationship between **heart disease risk** and **death risk** according to the Framingham Study?
Directly correlated
## Footnote
Higher heart disease risk leads to a higher risk of death.
88
True or false: The **Framingham Study** outcomes have been applied successfully to patients in clinical medicine.
TRUE
## Footnote
The study's findings have been embraced by clinicians.
89
What happens to the **HRs from the Framingham study** if not adjusted downward?
They would overstate relative risk
## Footnote
Adjustments are necessary to account for actual death rates.
90
Fill in the blank: The **variables** studied in predictive analytics do not exist in _______.
isolation
## Footnote
They may influence each other and have correlations.
91
92
What can findings from **Framingham** be used as a proxy for?
mortality
## Footnote
Findings help guide answers to underwriting questions that have arisen through the years.
93
What does **NHANES** stand for?
National Health and Nutrition Examination Survey
## Footnote
NHANES produces de-identified datasets of U.S. residents who have undergone exams and blood draws.
94
What study's data is used alongside Framingham equation coefficients to analyze CAD risk?
NHANES III study
## Footnote
This allows observation of the distribution of CAD risk within the aggregate standard class.
95
What is the average **SBP** for males that results in a relative CAD risk of 1.0?
124
## Footnote
A male with a SBP of 124 will have a relative CAD risk of 1.0 for that factor.
96
What are the criteria for being in the **aggregate standard class** regarding CAD risk?
* SBP ≤ 150
* DBP ≤ 94
* Chol ≤ 275
* Ratio ≤ 7.8
* BMI ≤ 34
## Footnote
All factors are considered together when creating a final individual risk for CAD.
97
Assigning the average risk of CAD at **1.00** results in what type of distribution?
bell-shaped or normal curve
## Footnote
The graph results are limited to the risk range associated with the standard class.
98
What does the **x-axis** represent in the CAD risk distribution graph?
relative risk of CAD
## Footnote
Everyone is placed in one of the CAD relative risk categories based on their score.
99
True or false: Most people have a relative risk close to **1.00** in the CAD risk distribution.
TRUE
## Footnote
This is why the bars in the middle of the graph are tallest.
100
What happens to the height of the bars in the tails of the CAD risk distribution graph?
much smaller
## Footnote
Fewer people have extreme scores, resulting in smaller heights for these bars.
101
What is the purpose of **subdividing the aggregate standard class** in risk classification?
To create unique subsets for calculating mortality or CAD risk assumptions
## Footnote
This allows actuaries to price preferred criteria based on individual insureds within each risk class.
102
How is the **relative risk for a class** determined?
It is the average relative risk for everyone that qualifies for that risk class
## Footnote
This average describes how actuaries price preferred criteria.
103
What are **knock-out criteria** used for in underwriting?
To assign preferred risks based on simplistic rules
## Footnote
Knock-out criteria became the norm for stratifying preferred risks despite not being an underwriting fundamental.
104
True or false: Knock-out criteria consider all findings when determining risk class.
FALSE
## Footnote
The least favorable finding defines the risk class for the proposed insured, regardless of other favorable factors.
105
What does the **Knock-Out Criteria Table** illustrate?
* Chol Ratio
* SBP
* DBP
* BMI kg/m
* Relative Risk
## Footnote
It categorizes individuals into super preferred, preferred, and residual standard based on specific health metrics.
106
In the knock-out criteria example, what is the relative risk of CAD for **super preferred** individuals?
70% of average
## Footnote
This indicates a lower risk compared to the average population.
107
What is the relative risk of CAD for **preferred** individuals according to the knock-out criteria?
104% of average
## Footnote
This indicates that preferred individuals have a risk level slightly above the average.
108
What is the relative risk of CAD for **residual standard** individuals?
138% of average
## Footnote
This indicates a higher risk compared to the average population.
109
What does Figure 2 show regarding the distribution of **relative risks**?
It shows that individuals with similar relative risk of CAD can fall into any one of the three knock-out risk classes
## Footnote
The distribution is visually represented with different shades indicating risk classes.
110
What does an **ideal risk model** assume?
It assumes the perfect model has identified and correctly weighted every risk factor associated with an individual
## Footnote
This model aims to accurately predict risk based on comprehensive data.
111
What is the **CAD relative risk score** used for?
It is used as the preferred criteria in risk modeling
## Footnote
This score helps in evaluating the risk associated with individuals.
112
How many criteria are typically used to define a **preferred risk**?
10 to 15 criteria
## Footnote
These criteria do not account for every risk factor influencing mortality.
113
What is the advantage of a **debit/credit system** over knock-out criteria?
It is superior for underwriting
## Footnote
This system allows for more nuanced risk assessment compared to strict knock-out criteria.
114
What can underwriters do with the data described in this chapter?
They can scenario test different underwriting strategies and report results
## Footnote
This allows for better decision-making in risk assessment.
115
What is the significance of the publication **On the Risk Vol. 29 n. 4 pages 42-52**?
It describes the effects of a mixed system of knock-out criteria overlayed with a debit-credit system
## Footnote
This publication provides insights into practical applications of risk modeling.
116
What are the **two preferred risk stratification models** in use today?
* Point systems
* Knock-out criteria
## Footnote
Point systems define risk classes based on point groupings, while knock-out criteria use rules to classify risk.
117
In a **point system**, what point range might qualify a proposed insured for **super preferred**?
0 to 4 points
## Footnote
This indicates a lower risk classification based on the point system.
118
What is the purpose of **holistic final risk class decision** in underwriting?
To consider all factors and allow favorable factors to offset unfavorable factors
## Footnote
This approach is superior to knock-out criteria.
119
True or false: **Knock-out criteria** is an underwriting fundamental.
FALSE
## Footnote
Knock-out criteria were introduced to help underwriters stratify risk but are not fundamental to underwriting.
120
What does a **knock-out system** use to determine risk classes?
A series of rules associated with each factor
## Footnote
Proposed insureds are either qualified for a risk class or 'knocked out' based on these rules.
121
In a knock-out system, if a proposed insured has a cholesterol level of **253**, what risk class will they be assigned?
Second-best preferred class
## Footnote
They are 'knocked out' of the best preferred class due to their cholesterol reading.
122
What is the relationship between **predictive analytic programs** and underwriting?
They mirror the underwriting debit-credit world
## Footnote
Regression models produce results similar to multivariate Cox models.
123
What is a major disadvantage of the **knock-out model** compared to point systems?
It cannot compete in terms of accuracy
## Footnote
Predictive models and point systems provide more accurate risk assessments.
124
Fill in the blank: The **Framingham point system** is an example of a _______.
point system
## Footnote
It is used for risk stratification in underwriting.
125
What is the **knock-out method** of risk classification?
Creates issues with insureds meeting preferred criteria on all but one factor
## Footnote
Unlike a point system, the knock-out method does not allow favorable factors to offset one unfavorable criterion.
126
How is **product pricing** determined in risk classification?
Based on the average mortality of all risks in the class
## Footnote
Pricing plans consider both favorable and unfavorable risks assigned to the class.
127
What are **stretch criteria** in risk classification?
Secondary guidelines to redefine a risk
## Footnote
These allow some proposed insureds to move to a better risk class based on secondary considerations.
128
Is there a **set number** of preferred risk classes in the insurance industry?
No, it varies throughout the industry and by individual companies
## Footnote
The number of preferred risk classes can differ by product.
129
Which type of insurance products are more likely to have **fewer preferred risk classes**?
Permanent products offering investment-oriented cash value accumulations
## Footnote
These products focus more on investment performance than on mortality differentials.
130
What is the primary basis for pricing in **term insurance**?
Mortality assumptions
## Footnote
Preferred risks produce lower mortality assumptions, influencing product designs.
131
What must be communicated to the **actuarial department** regarding pricing?
All underwriting rules including stretch criteria
## Footnote
This ensures that product price reflects the complete set of underwriting considerations.
132
What is the impact of **stricter preferred criteria** on qualification for preferred class?
Fewer individuals will qualify
## Footnote
Changes in class size based on new criteria must be scenario tested.
133
What does a **direct company** define in risk classification?
Preferred risk classes and underwriting rules
## Footnote
This produces a qualification assumption for risk classification.
134
What are the primary **coronary risk factors** identified by the Framingham Study?
* Age
* Sex
* Blood pressure
* Cholesterol
* HDL cholesterol
* Diabetes
* LVH on resting EKG
* Smoking
## Footnote
These factors are weighted by importance using mathematical models translated into risk table point scores.
135
What are the **Framingham risk factors** considered in preferred risk underwriting?
* Age
* Gender
* Smoking status
## Footnote
These factors are predictors of coronary artery disease (CAD) and indirectly mortality.
136
How does **blood pressure** relate to preferred risk underwriting?
Blood pressure is a major criterion, with a continuum of risk for developing CAD even within normal ranges
## Footnote
Some companies relax blood pressure rules for older proposed insureds through age banding.
137
What is the ideal total **cholesterol** reading according to the ATP III Guidelines?
Less than 200 mg/dl
## Footnote
Readings of 200 to 239 mg/dl are considered borderline high.
138
What is the relationship between **HDL cholesterol** and CAD risk?
HDL cholesterol is inversely correlated with CAD risk
## Footnote
Higher HDL levels reduce the risk of developing CAD.
139
True or false: **Diabetes and LVH on resting EKG** are considered in preferred risk underwriting.
FALSE
## Footnote
These factors are generally deemed outside the scope of preferred risk underwriting.
140
What is the significance of **build** in risk assessment for insurance?
Build is a known risk factor for CAD and all-cause mortality
## Footnote
It is excluded from the Framingham equation but included in other risk assessments.
141
What does the **cholesterol/HDL ratio** indicate?
Lower ratio indicates lower risk of CAD
## Footnote
This ratio is used in conjunction with total cholesterol to define risk.
142
What is the **ideal body weight** according to the build study of 1979?
95% of the average weight of U.S. insureds
## Footnote
Mortality associated with obesity reflects a J-shaped curve as weight increases.
143
Name the **additional mortality markers** used in setting preferred criteria.
* Accidental Death Risk
* Driving record criteria
* Hazardous avocations
* Occupations
* Criminal history
## Footnote
These factors help mitigate risks associated with preferred criteria.
144
True or false: **Driving record criteria** can mitigate the accidental death risk.
TRUE
## Footnote
Companies employ driving criteria for preferred qualification based on moving infractions.
145
What are some examples of **hazardous avocations** that can affect preferred risk criteria?
* Private pilots
* Scuba divers
* Racing motorcycles or automobiles
* Mountain climbers
* Skydivers
* Parasailers
* Participation in extreme sports
## Footnote
Companies may set limits on these activities for preferred risk classification.
146
What impact does **criminal history** have on preferred risk criteria?
Increased mortality risk
## Footnote
Some companies use criminal history as a preferred risk factor.
147
Fill in the blank: Companies may exclude histories of drug or alcohol abuse occurring within _______ of the application from preferred consideration.
5 or 10 years
## Footnote
This exclusion is due to the increased risk of accidental death and other pathologic reasons.
148
What is the relationship between **weight** and **mortality** according to the J-shaped curve?
As weight increases, mortality increases
## Footnote
This relationship is reflected in the build tables commonly used in preferred criteria.
149
What role do **occupations** play in preferred risk criteria?
Dangerous occupations may be excluded
## Footnote
This is due to the associated accidental death risk.
150
What is the impact of **certain diseases** on preferred risk consideration?
* May warrant exclusion from preferred consideration
* Can qualify for standard life insurance
* Not adverse enough to be rated
## Footnote
These diseases may contain enough extra mortality to affect risk classification.
151
What does the **Framingham Study** indicate about family medical histories?
* Statistically credible predisposition for offspring
* Consideration of medical histories of parents/siblings
* Relevant for diseases like CAD, diabetes, stroke, kidney disease, and certain cancers
## Footnote
Family history can influence risk class treatment.
152
What factors can affect the accuracy of **family medical histories**?
* Date of onset of disease
* Date of death from disease
* Recall accuracy of offspring
* Environmental factors (e.g., smoking habits)
## Footnote
Some diseases may be sex-distinct, affecting applicability.
153
True or false: Some companies allow treated **hyperlipidemia** or **hypertension** into a preferred risk class.
TRUE
## Footnote
Practices vary among companies regarding treatment acceptance.
154
What is the future of **preferred risk underwriting** expected to involve?
* New vendors entering the industry
* Pricing and mortality discounts
* Continuous functions for preferred risk stratification
## Footnote
New vendor offerings may correlate with mortality rates and impact underwriting practices.
155
What is a primary goal of the chapter regarding **new vendor offerings**?
* Help underwriters understand research behind offerings
* Demystify vendor findings
* Equip underwriters with tools to vet findings
## Footnote
Understanding independent variables and their mortality weightings is crucial.
156
What is the **average age** of the group in the original **Framingham Study** dataset?
45
## Footnote
The dataset comprises males and females between the ages of 28 and 62.
157
The **assumptions** used in setting preferred risk factors are best suited for which age group?
Middle-aged individuals
## Footnote
These assumptions are less well suited to younger or older individuals.
158
What do some companies adjust based on **age** in relation to preferred criteria?
Values associated with the preferred criteria
## Footnote
Companies should consider specific studies relating to the older age subset.
159
What is the key reason for creating **preferred risk classes**?
To reward healthy individuals with lower life insurance premiums
## Footnote
This allows companies to compete effectively by applying lower-priced products to healthier risks.
160
What is a challenge of **preferred risk underwriting** for proposed insureds?
Qualifying for preferred risk classes
## Footnote
This can create disappointment if fewer proposed insureds qualify.
161
What do exams and fluids originally launched in preferred underwriting create?
Expense and time delay
## Footnote
This stress point is being tested by new models using publicly available data.
162
What is the underwriting model called when exams and fluids are replaced with publicly available data?
Accelerated underwriting
## Footnote
This enhances speed but may reduce the number of salient factors for preferred risk stratification.
163
True or false: Preferred risk underwriting allows for more potential for proposed insureds to be disappointed.
TRUE
## Footnote
Fewer proposed insureds qualify for better risk classes, leading to more appeals and not taken offers.
164
Underwriters are under additional scrutiny to stay within guidelines for what?
Finer mortality class differentials
## Footnote
This is crucial when assessing risk class in preferred risk pricing.
165
Before the implementation of preferred risk pricing, what offset the deleterious impact of a modestly substandard risk?
Healthier risks in the aggregate standard pool
## Footnote
With preferred risk classes, healthier lives are clearly identified and placed in their own lower risk pool.
166
What are **appeals from the field** more common in?
Administrative handling
## Footnote
Appeals from the field can create processing hurdles and delays.
167
What has become an integral part of the **underwriter's risk selection duties**?
Distinguishing preferred risks
## Footnote
This process is essential for effective underwriting.
168
What has led to **health and lifestyle modifications** in American lives?
Clinical research
## Footnote
This research has been the impetus behind preferred risk stratification.
169
What did the literature show insurers regarding **mortality differential**?
Additional mortality differential within the aggregate standard class
## Footnote
This finding has implications for risk assessment.
170
How have **preferred risk classes** changed the way underwriting is performed?
They have altered the underwriting process
## Footnote
This change will affect underwriting for the foreseeable future.
ALU 202
flashcards
Decks in class (7)
# Cards
