ALU 202: Ch. 15 Red Flags, Anti-Selection, and
Fraud (Questions With Accurate Solutions)
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Terms in this set (32)
Anti-Selection used to describe a situation, either medical or
financial, in which a proposed insured or agent
conceal, falsify, or materially misrepresent
information at the time of application to the
detriment of the insurance carrier. This term also
includes simple avoidance of detection if one party
has information another party does not have.
Fraud deceit, trickery, sharp practice, or breach of
confidence perpetrated for profit or to gain some
unfair or dishonest advantage
Collusion a secret agreement, especially for fraudulent or
treacherous purposes, created in order to cheat or
deceive others; can occur anywhere in the sales
process
MIB /IAI Insurance Activity Index generated for both formal and informal applications
to help UWs track the approximate dates of all life
insurance activity through coded entries for the past
7 yrs and activity hits for the past 2 yrs
4 of last 7 years amount of time and level of activity that triggers the
use of a specific code to be presented on PI's record
which helps UWs analyze the individuals prior buying
patterns
3 red flag buying patterns stacking of coverage; avoidance of requirements;
early lapse or possible rebating scenario
, Stacking of Coverage the planned purchases of multiple policies for
smaller face amounts through multiple carriers rather
than purchasing one policy for a larger face amount
from one carrier - done over any amount of time
period and prevalent among simplified issue
products since it doesn't typically involve exams or
full applications
Banding when actuaries price premium rates so that the
premium for $100k of fully underwritten coverage is
less expensive than $99k of simplified issue as a
deterrent to the practice of stacking
The red flag question UWs should ask "Why is an apparently healthy individual willing to pay
more for multiple policies at a higher premium, with
multiple policy fees, through multiple carriers, when
a fully underwritten policy for the total face amount
with any one carrier would be a much less expensive
and an easier process?"
What an UW should do when faced consider ordering additional requirements including
with red flags an exam, blood and urine specimen, attending
physician's statement (APS), or pharmaceutical
database check "for cause" to rule out any possible
anti-selection
the main characteristics of simplified convenience, lack of invasive testing, smaller face
issue amounts, non-preferred rate classes, and a higher
cost of insurance per unit of coverage
Concurrent Applications to Multiple similar to stacking, this is often seen in fully
Carriers to Avoid Additional UW Reqs underwritten cases for much larger face amounts;
though the motivation can sometimes include
diversification and seeking capacity, it can sometimes
be done to avoid reqs
Reqs PI's attempt to avoid using red Federal income 1040 tax returns, audited third party
flag tactic of concurrent applications financial statementws, inspection reports, credit
to Multiple carriers reports, treadmill EKGs, timed vital capacity tests,
CXRs, drug screens, complete blood counts
Fraud (Questions With Accurate Solutions)
Save
Terms in this set (32)
Anti-Selection used to describe a situation, either medical or
financial, in which a proposed insured or agent
conceal, falsify, or materially misrepresent
information at the time of application to the
detriment of the insurance carrier. This term also
includes simple avoidance of detection if one party
has information another party does not have.
Fraud deceit, trickery, sharp practice, or breach of
confidence perpetrated for profit or to gain some
unfair or dishonest advantage
Collusion a secret agreement, especially for fraudulent or
treacherous purposes, created in order to cheat or
deceive others; can occur anywhere in the sales
process
MIB /IAI Insurance Activity Index generated for both formal and informal applications
to help UWs track the approximate dates of all life
insurance activity through coded entries for the past
7 yrs and activity hits for the past 2 yrs
4 of last 7 years amount of time and level of activity that triggers the
use of a specific code to be presented on PI's record
which helps UWs analyze the individuals prior buying
patterns
3 red flag buying patterns stacking of coverage; avoidance of requirements;
early lapse or possible rebating scenario
, Stacking of Coverage the planned purchases of multiple policies for
smaller face amounts through multiple carriers rather
than purchasing one policy for a larger face amount
from one carrier - done over any amount of time
period and prevalent among simplified issue
products since it doesn't typically involve exams or
full applications
Banding when actuaries price premium rates so that the
premium for $100k of fully underwritten coverage is
less expensive than $99k of simplified issue as a
deterrent to the practice of stacking
The red flag question UWs should ask "Why is an apparently healthy individual willing to pay
more for multiple policies at a higher premium, with
multiple policy fees, through multiple carriers, when
a fully underwritten policy for the total face amount
with any one carrier would be a much less expensive
and an easier process?"
What an UW should do when faced consider ordering additional requirements including
with red flags an exam, blood and urine specimen, attending
physician's statement (APS), or pharmaceutical
database check "for cause" to rule out any possible
anti-selection
the main characteristics of simplified convenience, lack of invasive testing, smaller face
issue amounts, non-preferred rate classes, and a higher
cost of insurance per unit of coverage
Concurrent Applications to Multiple similar to stacking, this is often seen in fully
Carriers to Avoid Additional UW Reqs underwritten cases for much larger face amounts;
though the motivation can sometimes include
diversification and seeking capacity, it can sometimes
be done to avoid reqs
Reqs PI's attempt to avoid using red Federal income 1040 tax returns, audited third party
flag tactic of concurrent applications financial statementws, inspection reports, credit
to Multiple carriers reports, treadmill EKGs, timed vital capacity tests,
CXRs, drug screens, complete blood counts
