Field Underwriting Procedures — practice questions

6.2% of the exam ≈8 real questions 8 free questions here

The agent's job as field underwriter: the application, MIB and consumer reports, receipts, delivery, replacement and contract law: about 8 of the 130 scored questions.

Where people lose points

• An MIB code alone can never be the basis for declining; the insurer must investigate.
• A policy issued with a rider or rating is a counteroffer the applicant must accept.
• Unilateral means only the insurer is bound; adhesion means the insurer wrote it.
• Premiums collected belong to the insurer and are held in a fiduciary capacity.

Questions and answers, explained

All 7 questions above, with the correct answer and why it is correct. Everything here is on field underwriting procedures.

1. While completing an application for health insurance, the applicant gives the agent an answer that later must be corrected. What is the BEST way to correct the application?

   • AErase the incorrect answer or cover it with correction fluid and write in the new answer
   • BHave the agent correct the answer later and initial the change on the applicant's behalf
   • CDraw a line through the incorrect answer, insert the correct one, and have the applicant initial the changeCorrect
   • DSubmit the application unchanged and explain the error to the underwriter by phone

   Why: The application is the insurer's primary source of underwriting information and typically becomes part of the contract, so any change must be clearly visible and acknowledged by the applicant with his or her initials — or a fresh application should be completed. An agent must never alter an application on his or her own or conceal a correction.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

2. Elena applied for an individual disability income policy, paid the initial premium, and received a conditional receipt. No medical exam was required. Ten days later — before the insurer issued the policy — she was seriously injured in an accident. Underwriters then determine she was insurable as a standard risk on the date of the application. The insurer should

   • Apay the claim, because under the conditional receipt coverage began on the application dateCorrect
   • Bdeny the claim, because the policy had not yet been issued or delivered to her when she was hurt
   • Cdeny the claim but refund the premium she paid with the application
   • Dpay the claim only if the agent had express authority to bind the coverage

   Why: A conditional receipt makes coverage effective as of the date of the application (or the medical exam, if one is required) provided the applicant is later found insurable as applied for at standard rates. Because Elena met that condition, the loss is covered even though the policy had not yet been issued; had she been found uninsurable, the receipt would have provided no coverage at all.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

3. Which of the following is one of the essential elements required to form a valid insurance contract?

   • AConditions
   • BConsiderationCorrect
   • CNotarization of the application
   • DPhysical delivery of a printed policy

   Why: The four elements of a valid contract are agreement (offer and acceptance), consideration, competent parties, and legal purpose. In insurance, the applicant's consideration is the premium plus the statements in the application, and the insurer's consideration is its promise to pay covered claims; notarization and physical delivery are not required to form the contract.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

4. When an insurer requires a paramedical examination as part of underwriting, who selects and pays the examiner?

   • AThe insurer selects and pays the examiner, who acts as the insurer's representativeCorrect
   • BThe applicant selects and pays the examiner, who reports to the applicant
   • CThe agent selects the examiner and the applicant pays the examination fee
   • DThe state selects the examiner from a list of approved medical providers

   Why: Medical and paramedical examinations are ordered, arranged, and paid for by the insurer, and the examiner acts on the insurer's behalf, which is why the results go directly to the underwriter rather than to the applicant. Exams are generally triggered by the face amount applied for, the applicant's age, or answers on the application that call for objective medical evidence.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

5. An insurance contract is described as aleatory because

   • Ait is drafted entirely by the insurer and offered on a take-it-or-leave-it basis
   • Bonly one party makes a legally enforceable promise
   • Cthe values exchanged by the parties may be unequal and depend on an uncertain eventCorrect
   • Dthe insured must satisfy certain requirements before the insurer is obligated to pay

   Why: Aleatory means the exchange is unequal and contingent: the insured may pay a modest premium and collect a large benefit, or pay premiums for years and collect nothing at all. Choice A describes a contract of adhesion, choice B describes a unilateral contract, and choice D describes a conditional contract — all separate characteristics of the very same policy, which is why they read as plausible.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

6. An applicant applied for a standard health policy, but the insurer issued it with a rated premium and an exclusion rider. When the agent delivers the policy, the agent must

   • Acollect the premium and say nothing, because the applicant already applied for coverage
   • Bexplain that the policy is a counteroffer, obtain the applicant's signed acceptance, and collect any added premiumCorrect
   • Creturn the policy to the insurer and demand that it be reissued at standard rates as applied for
   • Ddeliver the policy but leave the exclusion rider unsigned so that it will not apply

   Why: A policy issued on terms other than those applied for is a counteroffer rather than an acceptance, so no contract is formed until the applicant accepts the changed terms — normally by signing an amendment or acceptance form and paying any additional premium. Choice A is the classic field-underwriting failure: delivering a modified policy without explaining and documenting the change sets up a disputed claim later and exposes the agent to disciplinary action and E&O liability.

   Reference Texas outline #124401, general section IX (Field underwriting procedures)

7. During a health application, the agent gives the applicant a notice explaining how the insurer may use and disclose protected health information. This notice comes from:

   • ACOBRA
   • BHIPAA's privacy ruleCorrect
   • CThe Fair Credit Reporting Act, which governs consumer and investigative reports used in underwriting
   • DThe USA PATRIOT Act

   Why: HIPAA's privacy rule requires health plans and insurers to give a notice of privacy practices describing how protected health information is used and disclosed, and requires a valid authorization for uses not otherwise permitted. FCRA governs consumer reports; the PATRIOT Act governs anti-money-laundering programs.

   Reference Texas outline #124401, general section IX.B (HIPAA privacy information)

Topics inside this domain

• Replacing life insurance and annuities in Texas

Drill other domains

• Types of Life Policies and Annuities (11.5%)
• Life Policy Riders, Provisions, Options and Exclusions (11.5%)
• Life Application, Underwriting and Policy Delivery (9.2%)
• Retirement and Other Life Insurance Concepts (6.2%)
• Types of Health Policies (12.3%)
• Health Policy Provisions, Clauses and Riders (11.5%)

← Back to the full practice exam