An insurance company's home office is evaluating a new life insurance submission. The applicant checked 'no' for all medical history inquiries on the submitted forms. Upon pulling a Medical Information Bureau (MIB) file, the underwriter discovers a recent code indicating treatment for a significant cardiovascular illness. Based on the rules governing sources of underwriting information, which of the following is the appropriate course of action for the insurer?
- AImmediately reject the submission and void the contract, as the health answers on the forms are legally binding warranties that have been breached.
- BCategorize the cardiovascular illness as a morale hazard due to the nondisclosure and automatically apply a substandard premium rating without further inquiry.
- Conduct further investigation by ordering an Attending Physician's Statement (APS), because coverage cannot be declined based solely on data from the MIB.Cevap
- DDirect the writing agent to unilaterally amend the health questionnaire to reflect the MIB findings before issuing the policy with a surcharge.
Cevap
Conduct further investigation by ordering an Attending Physician's Statement (APS), because coverage cannot be declined based solely on data from the MIB.
The Medical Information Bureau (MIB) helps insurers uncover misrepresentations by sharing coded medical information from previous applications. However, to protect consumers, insurers are legally prohibited from using an MIB report as the sole basis for an adverse underwriting decision, such as declining an applicant or charging a higher premium. Instead, the underwriter must conduct further investigation by requesting an Attending Physician's Statement (APS) or requiring a medical exam to independently verify the condition.
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Permissible Use of MIB Reports in Underwriting