Insurance Underwriting Fundamentals

FL Health Agent 240 Study Notes

• Insurance Organizations: An organization that transacts insurance only with its own members is a fraternal organization.
• Regulatory Power: The commissioner, superintendent, or director has the power to issue rules and regulations to enforce insurance laws.
• Legal Contract Elements: Representation is not an essential element of a legal contract.
• Insurance Policy Issuers: Insurance companies manufacture and sell insurance coverage.
• Contract Types: A unilateral contract is one where only one party is legally obligated after the premium is paid.
• Policyholder: The insured is the person or entity covered by the insurance policy.
• Fraternal Ownership: Fraternal insurance companies are owned by their members.
• Insurance Regulators: Members of the National Association of Insurance Commissioners (NAIC) include state and territorial insurance commissioners.
• Legislative Branch: The legislative branch writes and passes insurance laws, statutes, to protect the insuring public.
• Insurance Regulation Authority: Individual states have the highest authority for insurance regulations.
• Insurable Interest: Insurable interest for life insurance is required only at the time of the application.
• Foreign Insurers: Insurers incorporated in another state but doing business in the current state are considered foreign.
• Stock Insurance Ownership: Stock insurance companies are owned by stockholders.
• Life Insurance and Insurable Interest: In life insurance, insurable interest in one's own life is unlimited.
• Conditional Contract: A conditional contract requires both parties to perform specified duties for it to be enforceable.
• Indemnity Principle: An insured can be reimbursed up to the amount of actual loss (indemnity).
• Certificate of Authority: A Certificate of Authority grants an insurer the authority to operate in a specific state.
• Representations: Applicant statements of belief regarding facts are called representations.
• Misrepresentation vs. Material Misrepresentation: Material misrepresentations regarding facts affect the issuing of a policy, while a mere misrepresentation will not.
• Fair Credit Reporting Act: Individuals denied coverage can request a copy of their report.
• Mutual Insurance Company Dividends: Dividends from mutual insurance companies are non-taxable.
• Policy Acceptance: Insurance coverage begins when an applicant receives and legally signs the policy, agreeing to the terms and conditions and paying the additional premium, if any, as mutually agreed.
• Alien Insurer: An insurer formed under the laws of another country is an alien insurer.
• State Regulation: Insurance is primarily regulated at the state level.
• Executive Branch: The state's executive branch enforces existing statutes.
• Fraternal Benefit Societies: A nonprofit corporation without capital stock, formed solely for members, is a fraternal benefit society.
• Application Representations: A life insurance applicant's statements on their application are considered representations, not warranties.
• Judicial Branch: The judicial branch interprets and determines the constitutionality of statutes.
• Domicile: Domicile refers to the jurisdiction where an insurer was formed or incorporated.
• Application Submission Timeline: Coverage begins the day an application is submitted.
• Aleatory Contracts: Insurance contracts are aleatory contracts, with unequal exchanges of value.
• Policy Issuance: An insurer is considered an admitted insurer once authorized to do business in the state.
• Legal Authority: The NAIC (National Association of Insurance Commissioners) has no authority over insurance regulation.
• Certificate Issuance: The state insurance commissioner or director issues a Certificate of Authority to enable insurers to do business in the state.
• Warranties: Warranties are statements that must be guaranteed to be absolute truths.
• Conditional Receipt: Coverage may become effective the date of the application, or date of the completed medical exam if required.
• Health Insurance Policy Issuance: Coverage as applied for will likely occur as per the completed medical exam.
• Underwriting Information: The application is the primary source of underwriting information.
• Premium Collection: The agent collects the full premium amount at the time of delivery.
• Policy Delivery: Legal delivery of a policy occurs when the policy is issued as applied for and the premium is fully collected.
• Unanswered Questions: If questions on an insurance application are unanswered, the insurer is waiving the right to have those questions answered and the policy will proceed.
• Applicant Notification: Applicant misrepresentation will be resolved.
• Producer Role: Producers ensure the application is complete and accurate.
• Medical Information Bureau (MIB): The MIB provides medical information.
• Underwriting: Field Underwriting is the initial step in the process of insuring a health risk.
• Specified Periods: Probationary period is the period when new coverage goes into effect.
• Preexisting Conditions: Preexisting conditions must be disclosed on required forms.
• Conditional Receipts: Conditional receipts are issued to indicate coverage begins at a specified time, such as the date of the application, medical exam, or policy issuance.
• Statements of Good Health: A signed statement of good health is required if an initial premium is not paid at time of application.
• Accidental Bodily Injury: A spontaneous, unforeseen, and unintended event resulting in injury.
• Policyowner: The policyowner controls policy decisions and coverages.
• Beneficiaries: Beneficiaries are individuals specifically named in the policy who receive benefits upon the insured's loss.
• Insurer's Home Office: Ultimately, the insurer's home office underwriter determines an applicant's insurability.
• Health Insurance Application Concerns: Inaccurate or missing information on the application necessitates corrective action.
• Fair Credit Reporting Act (FCRA): Consumers must be notified about the use of applicant information under the FCRA (Fair Credit Reporting Act).
• Policy Payment Methods: The premium may be payable at the time of application with a conditional receipt, or at the time of policy delivery.
• Primary Care Physician: A Primary Care Physician (PCP) or Gatekeeper serves as the primary point of care for an insured person.
• Health Insurance Claims: If a claim is denied due to inaccuracies, this is resolved.

Test your knowledge on key concepts in insurance underwriting, including the role of the probationary period, disclosure of medical conditions, and the responsibilities in an insurance application. This quiz covers essential principles and regulations that govern the underwriting process in health insurance.