ALU 202 Exam Ch 15: Red Flags, Anti-Selection,
and Fraud – Questions & Correct Solutions
Save
Terms in this set (102)
Introduction - Key Terms and Fraud
Definitions
_________: a false representation of a
matter of fact, whether by words or by
conduct, by false or misleading
allegations, or by concealment of
what should have been disclosed, that
deceives and is intended to deceive
another so that individuals will act
upon it to their legal injury
Introduction - Key Terms and Anti-selection or adverse selection
Definitions
___________: the INTENTIONAL
withholding of information that one
knows to acquire insurance on a more
favorable basis than one could have if
this information were known to the
insurer
,Introduction - Key Terms and Material misrepresentation
Definitions
____________: the act of INTENTIONAL
concealment or fabrication of a
material fact, which, if known to the
other party (i.e. the insurance
company), could have terminated or
significantly altered the basis of a
contract, deal or transaction
Introduction - Key Terms and Collusion
Definitions
____________: a secret agreement,
especially for fraudulent or
treacherous purposes, created w/ the
INTENT to defraud other parties of
their rights.
-it can occur anywhere in the sales
process and the underwriter must
have adequate training and critical
thinking skills to be able to ferret out
anti-selective practices
Introduction - Facts About Insurance $10-20 billion
Fraud
1) According to statistics from the
Coalition Against Insurance Fraud, the
annual cost of fraud across the entire
insurance industry is about $80-90
billion annually, of which $_____-_____
billion of that is estimated in the life
insurance industry alone
,Introduction - Facts About Insurance 5-10%
Fraud
2) A poll conducted in 2022 at a life
insurance industry fraud conference
noted that:
---35% of insurance companies
estimate that ___-____% of claims are
found fraudulent on investigation
---68% of consumers believe that
fraud happens b/c people believe
they can get away with it
---51% of insurers have experienced
an increase in fraud as well as an
increase in the complexity of the fraud
being committed
Introduction - Facts About Insurance 15-30%
Fraud
3) It has been estimated that ____-____%
of applicants will deliberately not
disclose relevant info. The # varies
based on the product, how they can
benefit and potential punishment ( jail
time is unlikely; declination of the life
app w/ refund of premium is most
likely)
4) There is potential for lost profits,
revenue and client assets
Introduction - Facts About Insurance $90 billion
Fraud
5) Costs are passed on to customers
by increasing premiums to offset
losses. Insurance fraud costs each
household approx $700 annually, so
w/ approx 130 millions households in
the US, it's about $____ billion annually
, Introduction - Facts About Insurance
Fraud
6) The company's reputation is at risk
7) There is adverse impact for future
business and referrals
8) It can cause a negative customer
experience
9) In extreme cases, people's lives can
be at risk
Red Flags at Time of Underwriting - 7, 2
Extensive Medical Information Bureau
(MIB) Activity
The underwriter is able to track the
approximate dates of all life insurance
activity through MIB coded entries for
the past _____ years and the Insurance
Activity Index (IAI) hits for the past
______ years.
Red Flags at Time of Underwriting - 4
Extensive Medical Information Bureau
(MIB) Activity
Life insurance activity that occurred in
at least ____ of the past 7 years is also
identified by MIB through the use of a
specific code, present on the
proposed insured's record.
and Fraud – Questions & Correct Solutions
Save
Terms in this set (102)
Introduction - Key Terms and Fraud
Definitions
_________: a false representation of a
matter of fact, whether by words or by
conduct, by false or misleading
allegations, or by concealment of
what should have been disclosed, that
deceives and is intended to deceive
another so that individuals will act
upon it to their legal injury
Introduction - Key Terms and Anti-selection or adverse selection
Definitions
___________: the INTENTIONAL
withholding of information that one
knows to acquire insurance on a more
favorable basis than one could have if
this information were known to the
insurer
,Introduction - Key Terms and Material misrepresentation
Definitions
____________: the act of INTENTIONAL
concealment or fabrication of a
material fact, which, if known to the
other party (i.e. the insurance
company), could have terminated or
significantly altered the basis of a
contract, deal or transaction
Introduction - Key Terms and Collusion
Definitions
____________: a secret agreement,
especially for fraudulent or
treacherous purposes, created w/ the
INTENT to defraud other parties of
their rights.
-it can occur anywhere in the sales
process and the underwriter must
have adequate training and critical
thinking skills to be able to ferret out
anti-selective practices
Introduction - Facts About Insurance $10-20 billion
Fraud
1) According to statistics from the
Coalition Against Insurance Fraud, the
annual cost of fraud across the entire
insurance industry is about $80-90
billion annually, of which $_____-_____
billion of that is estimated in the life
insurance industry alone
,Introduction - Facts About Insurance 5-10%
Fraud
2) A poll conducted in 2022 at a life
insurance industry fraud conference
noted that:
---35% of insurance companies
estimate that ___-____% of claims are
found fraudulent on investigation
---68% of consumers believe that
fraud happens b/c people believe
they can get away with it
---51% of insurers have experienced
an increase in fraud as well as an
increase in the complexity of the fraud
being committed
Introduction - Facts About Insurance 15-30%
Fraud
3) It has been estimated that ____-____%
of applicants will deliberately not
disclose relevant info. The # varies
based on the product, how they can
benefit and potential punishment ( jail
time is unlikely; declination of the life
app w/ refund of premium is most
likely)
4) There is potential for lost profits,
revenue and client assets
Introduction - Facts About Insurance $90 billion
Fraud
5) Costs are passed on to customers
by increasing premiums to offset
losses. Insurance fraud costs each
household approx $700 annually, so
w/ approx 130 millions households in
the US, it's about $____ billion annually
, Introduction - Facts About Insurance
Fraud
6) The company's reputation is at risk
7) There is adverse impact for future
business and referrals
8) It can cause a negative customer
experience
9) In extreme cases, people's lives can
be at risk
Red Flags at Time of Underwriting - 7, 2
Extensive Medical Information Bureau
(MIB) Activity
The underwriter is able to track the
approximate dates of all life insurance
activity through MIB coded entries for
the past _____ years and the Insurance
Activity Index (IAI) hits for the past
______ years.
Red Flags at Time of Underwriting - 4
Extensive Medical Information Bureau
(MIB) Activity
Life insurance activity that occurred in
at least ____ of the past 7 years is also
identified by MIB through the use of a
specific code, present on the
proposed insured's record.
