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Question

Difficulty: MediumSources of Underwriting Information

To properly evaluate the risk profile of a prospective policyholder, an underwriting department determines that both an Attending Physician's Statement (APS) and an Investigative Consumer Report are necessary. Regarding the regulatory compliance for obtaining and using these specific sources of underwriting information, which of the following statements are true?

  1. The applicant must sign a HIPAA-compliant disclosure authorization before the insurer can legally request the Attending Physician's Statement from their medical provider.Answer
  2. The insurer must provide a written disclosure to the applicant stating that an Investigative Consumer Report may be compiled, no later than three days after the report is requested.Answer
  3. C
    The insurer must issue an FCRA adverse action notification to the applicant immediately upon ordering the Investigative Consumer Report.
  4. D
    The producer is permitted to unilaterally amend the applicant's original medical questionnaire if the Attending Physician's Statement reveals missing health history.

Answer

The legally required actions are obtaining a signed HIPAA-compliant authorization prior to requesting the APS, and providing written notification to the applicant about the Investigative Consumer Report within three days of its request.
The applicant's signed authorization is federally required under HIPAA to release the Attending Physician's Statement. Additionally, the Fair Credit Reporting Act (FCRA) strictly mandates that applicants receive written disclosure about an Investigative Consumer Report within three days of the report being ordered.

Step-by-Step Solution

1
Analyze the compliance requirements for obtaining an Attending Physician's Statement (APS).
Under HIPAA, a specific, signed authorization from the applicant is required before a medical provider can release health records to an insurer.
Medical records contain protected health information (PHI) which is subject to strict federal privacy laws and cannot be shared without explicit consent.
2
Analyze the compliance requirements for ordering an Investigative Consumer Report.
Under the Fair Credit Reporting Act (FCRA), the insurer must inform the applicant in writing within three days of requesting the report that an investigation into their character and reputation may be conducted.
The FCRA mandates consumer transparency when gathering qualitative data through personal interviews with associates, friends, and neighbors.
3
Evaluate the incorrect procedures regarding adverse actions and application amendments.
Adverse action notices are only required after a negative underwriting decision is made based on a report. Furthermore, an agent cannot unilaterally change an application.
Modifying application data without the applicant's initialed consent invalidates the legal representations, and FCRA adverse action rules trigger upon the decision, not the inquiry.

Key Concept

Compliance Requirements for Sources of Underwriting Information (FCRA and HIPAA)
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Topics

Sources of Underwriting Information

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