Chapter 5: Post-Issue Policy Changes

Question 1

What are the key concepts in understanding if a policy change is valid?

Answer 1

1. Is it a contractural right or non-contractural right?
2. Will the resultig change effect the risk amount?
3. If the policy is non-contractural, will it effect insurability? What evidence is needed to evaluate this?
4. Is it anti-selective (is information being withheld from the insurer during the policy change)
5. Impact it will have on customers/prodcuers/company impact

Question 2

Why do underwriters get involved in policy changes?

Answer 2

Impact the bearing on how the policy holder perceives the company which can impact new and continued business

Question 3

What two perspectives should be considered by the company in regards to post-issue policy changes?

Answer 3

1. Except for policy incrases or adding a rider benefit, most post-issue policy changes will not result in additional premium income to the insurer and result in lesser premiums when a rating is involved. Good cutsomer service needs to be offered in minimum
2. For non-contractural policy changes, philosphoes can differ from one insurer to another.

Question 4

How do post-issue policy changes effect contestability periods?1

Answer 4

1. If a change occurs within two years and information appears within the contestability situation it should be contested.

Question 5

What are reinsurance implications for post issue policy changes?

Answer 5

If shopped FAC reinsurers need to independetly make decisions on post issue policy changes.

If there is more than one reinsurer for pooled business, often one of the participating poll reinsurers has been designated the lead to streamline this process.

Question 6

What would cause underwriting in a policy conversion?

Answer 6

1. Increase of face amount
2. Conversion from individual term to a survivor life or second-to-die policy.

Question 7

What is a 1035 Internal Exchange?

Answer 7

IRS allows your to exchange an insurance policy that you own for a new life inusrance policy without paying tax on the investment gains earned.