Completing the Application
Role of the Agent: Think of yourself as an agent who visits clients at their homes to fill out insurance applications and later, to deliver the issued policies.
Understanding Underwriting
- Purpose of Underwriting: To gather info about the applicant to decide the premium or whether to issue a policy.
- Types of Underwriters:
- Field Underwriter: You are the field underwriter, essentially the eyes and ears, verifying what the applicant says.
- Company Underwriter: Reviews the application and additional documents to decide on issuing the policy and setting the price.
Application Process
- Responsibility: Most companies want agents to fill out the application because agents know how to do it right.
- Observation: If you’re not filling it out, you need to watch the applicant do it to make sure they are truthful.
Parts of the Application
- Part One – General Information: Covers basic info like name, age, and address.
- Part Two – Medical Information: Includes health details that are important if you’re planning a long-term commitment like insurance.
Correcting Mistakes
- How to Correct: If there’s a mistake, draw a line through it and have the applicant initial the change.
- Completeness: Make sure the application is complete to avoid having to revisit the client for more info.
Getting Signatures
- Who Signs: You need signatures from yourself, the policy owner, and the insured. Sometimes that’s two or three different signatures, depending on whether the owner and insured are the same.
Handling Premiums
- Collecting Premiums: Sometimes you collect a premium with the application.
- Giving Receipts: Always give a receipt when you collect money, sometimes these are conditional receipts.
Agent’s Report
- Purpose: Lets you tell the company underwriter things you noticed, like if the house has ashtrays but the applicant claimed they don’t smoke.
Medical Exams
- Types:
- Paramedical Report: Done by a nurse or paramedic, just checks current health.
- Attending Physician’s Statement: More detailed, can show the applicant’s entire health history.
Underwriter’s Decision
- Ratings:
- Preferred: For very healthy people, means lower premiums.
- Standard: For average health, normal rates.
- Substandard: For those with health risks, means higher rates.
- Declined: When the company decides not to issue a policy at all.
Delivering the Policy
- Process: Go over the policy with the client at their home, make sure they understand everything, and collect any remaining premiums.
- Start Date: The policy starts when you first collect the money or when you deliver the policy and collect the money then.
Completing an Application Explained
When you are reading this chapter, no matter what type of job you will do with this license, it is easiest to think of yourself as an agent, who will go to somebody’s house, sit at their kitchen table, and fill out an application
with them for insurance. Once the insurance company accepts it, and issues the policy, you will be the one who will go back to their house and deliver it.
Remember, that underwriting is gathering information about the applicant in order to figure out what premium we’re going to charge them, or if we’re going to charge them at all.
There are two types of underwriters. You are one type of underwriter, known as the field underwriter. You are the eyes and ears. You are the one who gets to sit in front of the client and verify that what they’re saying is true. If they say they’re healthy, do they appear healthy? If they say they are a non-smoker, but there are ashtrays all over the house, you need to ask more questions. That is your job as a field underwriter.
The other underwriter is what I like to call as the company or desk underwriter. They are the one who looks at the application, and looks at mortality tables, and figures out if this person is somebody that we want to issue a policy for, and at what price. The company underwriter is going to use the application that is being filled out, by you the field underwriter. They are also going to use any medical reports that are pulled, or anything else they need to be able to make a decision.
Because the company underwriter is the one who makes the decision, but they did not see the applicant, you must make sure that you are getting as much information as possible and as accurate of information as possible.
Now, most insurance companies want the agents to be the one who is actually filling out the application. Since you handle the applications all day long, you know what goes on what line. Therefore, you should be asking questions and then filling out the application. If you are not the one filling out the application, you are expected to be watching the applicant as they fill out the application.
When you are completing this application, which is the main source of underwriting, there are two parts to the application.
Part 1 is general information. I like to think of this as the information I would need to know to go on a date with somebody. I would want to know their name, how old they are, where they live, you know the basics.
When I think of Part 2, which is medical information, I think of these are the things I would want to know if I’m going to marry and commit to this person. I need to know their medical background, especially if we are going to be having children together.
So, if I am taking the test, I think of Part One. What do I want to know if I’m going on a date with somebody.
When I think of Part Two I think of what do I want to know if I’m going to be marrying a person.
If I find that I have made an error in the application, I need to correct it. The best way, would be to throw out the application and start fresh. However, if that is not an option, then you can draw a line through the error and have the applicant initial the changes. You are never to erase or white out any of the application.
If the application is incomplete in anyway, it is my fault, and I will be the one who has to go back and get the questions answered. That’s it is very important to make sure I get all the information when I’m sitting down with applicant, so that I do not have to come back out to their house a second time for small pieces of information.
When the application is completed, I need to get to 2 to 3 signatures.
I always need my own signature, the owner of the policies signature, and whoever the insured is going to be. Sometimes the owner, and the insured are the same person. Sometimes they are different people. So this is why sometimes I need two signatures or three signatures. If the insured and owner are the same I only need their signature and my signature. if the owner is different from the insured, I need a signature from the owner, a signature from the insured, and my signature.
At this point, I may or may not collect premium. If I do collect a premium payment I always must give a premium receipt. Anytime I collect money, I need to give a receipt. Sometimes, the receipts are considered conditional receipts. Conditional receipts are very important, because they say that if everything checks out, with the application and medical records, then the policy will be issued on the day they made the payment.
Normally, an insurance application can take a couple weeks to be processed. A person, could die within those two weeks or become ill within those two weeks. If a person submitted an application with a conditional receipt, and they died, before the policy was issued, they can still be paid out.
When I submit the application, and the premium to the insurance company I also met hand in what is known as an agent’s report. An agent’s report is like a secret message from me, the field underwriter to the company underwriter. It will document anything that I think the company underwriter needs to know. perhaps it may note that there are ashtrays all over the house, and that the applicant smelled of smoke, but that they wrote down that they did not ever smoke.
The agent’s report will allow the company underwriter to require a further investigation to find out if the person is a smoker or not. The reason I say that this is a secret message, is because the Applicant, we’ll never see the agent’s report. It is only between the field underwriter and the company underwriter.
If the company underwriter wants a medical exam, there are two types of medical exams. A paramedical report, is completed by a paramedic or registered nurse. Basically they just draw blood and collect urine. These reports are actually more expensive however they provide minimal information. They only let us know how healthy the person is today.
The second type of medical report is known as an attending physician’s statement. These reports are much cheaper, because all we’re asking is for a doctor to fill out a piece of paper. However, this piece of paper can give us a person’s medical history for their whole life if the doctor has been seeing them that long.
Now, it is important to remember that no matter what the cost of these exams are they will always be paid for by the insurance company, never by the applicant.
After reviewing the application, and the medical reports, the underwriter needs to determine what the rating classification is going to be for the applicant. There are 3 ratings that underwriter can give an applicant.
Preferred, is for the very healthy people. This is for your marathon runners, your kale eaters. This rate is considered lower than normal.
Standard, is for the basic people. These are people who eat their kale, but they also eat cake. The standard rate, is considered the average rate.
Substandard, is like people who only eat cake. Now, I don’t mean that literally, but it’s a way to help you remember it for the test. Substandard could be a marathon runner who only eats kale, but everyone else in their family had cancer. Thus they have a high chance of cancer, so high in fact, that the insurance company is worried they will have it. This rate, is considered above the normal rate, or rated up.
Technically, there is also a 4th rating, which would be declined. This means that the insurance company will not offer a policy at all.
Now, let’s say the underwriter has decided to issue the policy. It is now your job to deliver the policy. you are expected to sit at the kitchen table with the client, and discuss the policy with them, making sure they understand the policies. The coverage is, at any changes with the coverages that may have occurred in the underwriting process.
You are also responsible, to collect any premium if it has not already been collected. The start date of the policy normally coincides with whatever date you collected money. If you collected money 2 weeks ago when you initially filled out the application, and you gave them a conditional receipt, then two weeks ago will be the date that the policy started. If you are collecting money today, on the day that you were delivering it the policy will start today.
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