1] The federal Fair Credit Reporting Act requires consumer reporting agencies to adopt reasonable procedures for exchanging information on credit, personnel, insurance, and other subjects in a manner that is fair and equitable to the consumer with respect to the confidentiality, accuracy, relevancy, and proper use of this information.
-All insurers and their producers must comply with the federal Fair Credit Reporting Act regarding information obtained from a third party
concerning the applicant.
-Reports on consumers are prohibited unless the consumer is made aware that an investigative consumer report may be made, and that such report may contain information about the person's character, reputation, personal characteristics, and lifestyle.
2] A Notice to Applicant must be issued to all applicants for life or health insurance coverage. This notice informs the applicant that a report will be ordered concerning their past credit history and any other life or health insurance for which they have previously applied. The agent must leave this notice with the applicant along with the receipt.
-This notice must be given to the consumer no later than three days after a report was requested.
-A consumer may make a written request for a complete disclosure of the nature and scope of the investigation underlying the report.
--Disclosure must be made in writing within five days after the date on which the consumer's request was received.
3] Consumer Rights Consumers who feel that information in their files is inaccurate or incomplete may dispute the information, and the reporting agencies may be required to reinvestigate and correct or delete information. Insurance companies may use consumer reports, or investigative consumer reports, to compile additional information regarding the applicant. If applicants feel that the information compiled by the consumer inspection service is inaccurate, they may send a brief statement to the reporting agency with the correct information.
4] Penalties Violators of the Fair Credit Reporting Act may be subject to fines and imprisonment and may be required to pay any actual damages suffered by a consumer, punitive damages awarded by a court, and reasonable attorney's fees. The maximum penalty for obtaining consumer information reports under false pretenses is $5,000, imprisonment for one year, or both
***
-3rd party information
-notice to applicant
REQUIRED
-consumers have rights & can dispute information in files
-penalty: fines [max $5,000] and/or imprisonment [one year]
Third party information -- notice to applicants REQUIRED -- consumers have rights and can dispute information in files -- penalty: fines [max of $5,000] and/or imprisonment [one year]
--Requires consumer reporting agencies to adopt reasonable procedures for exchanging information on credit, personnel, insurance and other subjects in a manner that is fair and equitable to the consumer with respect to the confidentiality, accuracy, relevancy and proper use of this information.
--All insurers and their producers must comply with federal FCRA regarding information obtained from a third party concerning the applicant.
--Reports on consumers are prohibited unless the consumer is made aware that an investigative consumer report may be made, and that such report may contain information about the person's character, reputation, personal characteristics and lifestyle.
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Terms in this set [55]
What action should a producer take if the initial premium is NOT submitted with the application?
Forward the application to the insurer without the initial premium
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a[n]
Anti-Money Laundering violation
Why must an insurance applicant answer all questions on the application?
Statements and representaions are considered guarantrees
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant.
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
The correct answer is "waived one of its legal rights". If an insurer accepts an application that contains unanswered questions and makes the application part of the life contract, the company has waived one of its legal rights.
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
The initial premium was not submitted with the application
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
An applicant's medical information received from the Medical Information Bureau [MIB] may be furnished to the
The correct answer is "applicant's physician". Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured's physician.
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D must?
Correct the information and have the prospect initial the change
Which of the following statements is CORRECT about an agent who is taking an insurance application?
The agent should have the applicant initial any changes made on the application
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
All of these are considered sources of underwriting information about an applicant EXCEPT
Rating Services
All of these are valid sources to obtain underwriting information about an applicant EXCEPT for a rating service [A.M. Best, Standard & Poor's].
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26
In this situation, coverage became effective on the date the policy was delivered and first premium collected.
What is the purpose of the U.S.A. Patriot Act?
detect and deter terrorism
What is the purpose of a Policy Summary?
It highlights the critical parts of the policy issued
A Policy Summary highlights the critical parts of the policy issued and describes the coverages, riders, and exclusions.
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
A life insurance application must be signed by all of these EXCEPT
beneficiary
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as
a representation
A representation is a statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract.
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine
probability of making timely premium payments
The purpose of these reports is to provide a picture of an applicant's general character and reputation, mode of living, finances, and any exposure to abnormal hazards.
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a[n]
exclusion for the medical condition
In this situation, the policy may be issued with an exclusion for the medical problem.
P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when
P receives the policy and pays the premium
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Aviation exclusion
A student pilot can pay standard premium costs for her life insurance policy with the addition of an aviation exclusion.
Any changes made on an insurance application requires the initials of whom?
Applicant
When an applicant makes a mistake in the information given to an agent in completing the application, the applicant can have the agent correct the information, but the applicant must initial the correction.
What is being delivered during a policy delivery?
The correct answer is "Insurance contract to the proposed insured". Policy delivery refers to the delivery of the insurance contract to the applicant.
Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
Risk classification
Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
Which of these do NOT constitute policy delivery?
Policy issued with a rating
When does a life insurance contract become effective if the initial premium is not collected during the application process?
When producer delivers policy and collects initial premium
Before a life insurance policy is issued, which of these components of the contract is required?
A signed application by the prospect
Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
The correct answer is "Conditional". A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Risk classification
To determine the premium rate on a Whole Life policy, an insurance company will consider the risk classification of the applicant.
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
The correct answer is "Conditional receipt". A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Inspection Report
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
The Fair Credit Reporting Act of 1970, or FCRA, established procedures for the collection and disclosure of information obtained on consumers through investigation and credit reports.
When an insurance application is taken by a producer, which of these statements is true?
Any changes made on the application require the applicant's initials
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded.
The free-look period begins when the policy is delivered to policyowner.
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
Marital status
An __ contained in a life insurance policy states that the policy will not cover certain risks
Exclusion
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of any other relevant information not contained in the application.
M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT
Free-look period has expired
Which parts of a life insurance policy are guaranteed to be true?
Warranty
Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
Upon
delivery of a rated life insurance policy, the Producer must obtain each of the following EXCEPT
Signed HIPAA disclosure
Signed amendment
Signed statement of Good Health
The required premium
Signed HIPAA disclosure
What would the Medical Information Bureau [MIB] identify?
The Medical Information Bureau [MIB] report will identify marijuana use determined by a previous screening.
On delivery of a policy, a signed statement of good health is typically requested if
The application was submitted without the initial premium
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors?
Gender
Who is NOT required to sign a life insurance application?
Beneficiary
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
At the time of application
Insurable interest must exist only at the policy inception.
The USA Patriot Act was enacted in
2001
A Medical Information Report [MIB] report may disclose which of the following
Prior use of marjuana
A Medical Information Report [MIB] may disclose lifestyle habits such as drugs, drinking, overeating and smoking.
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
the initial premium
Coverage begins on the day in which the producer collects the initial premium and has the applicant sign the life insurance contract.
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
The underwriting process involves all of these EXCEPT for
Policy loan
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing agent
If the company discovers a mistake or incompletion, it usually returns the application to the producer.
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