Chapter 17 Quiz

Twenty questions — fifteen multiple choice and five short answer — to check your grasp of life underwriting. Answers are in the collapsed block at the bottom; try the whole set before you open it. Figures are illustrative.

Multiple choice

1. Life underwriting is described as the "purest form of risk classification" mainly because: - A. life policies are the most profitable line of insurance - B. the event being insured (death) is certain, so the underwriting question is its timing and rate, not its occurrence - C. life insurers never decline applicants - D. there is no regulation of life insurance

2. An applicant assessed at a mortality ratio of 150% is expected to die at: - A. half the standard rate for their age and sex - B. the standard rate - C. 1.5 times the standard rate - D. a rate that cannot be expressed as a percentage of standard

3. The attending physician statement (APS) is valued above the application because it is: - A. cheaper and faster to obtain - B. written by the applicant under oath - C. a contemporaneous professional medical record not created for the insurer - D. a prediction of future health

4. A table rating of "Table 4," under the chapter's convention of ~+25% mortality per table, implies expected mortality of about: - A. 125% of standard - B. 150% of standard - C. 200% of standard - D. 400% of standard

5. The single largest modifiable mortality factor, the one that splits nearly every risk class into two, is: - A. age - B. tobacco use - C. occupation - D. cholesterol

6. Treated and well-controlled hypertension, documented as stable in the APS, is typically: - A. an automatic decline - B. a smaller debit than the raw reading suggests, or none - C. the same debit as untreated hypertension - D. a credit larger than for a person with normal pressure and no medication

7. Why can two applicants with an identical height and weight deserve opposite classifications? - A. the build chart is frequently printed with errors - B. weight is a proxy for body composition and metabolic health, which can differ sharply at the same number - C. one of them must be lying - D. height and weight do not affect mortality at all

8. Guaranteed-issue life insurance defends its pool against adverse selection primarily through: - A. a full paramedical exam - B. a detailed APS on every applicant - C. small face amounts, higher rates, and a graded death benefit - D. a predictive mortality model

9. A graded death benefit on a guaranteed-issue policy means that death from natural causes in the first two or three years pays: - A. double the face amount - B. the full face amount immediately - C. only a return of premiums (often with interest), not the full face amount - D. nothing, ever

10. In accelerated underwriting, an applicant whose instant data raises concerns is normally: - A. declined automatically - B. issued at the best rate anyway - C. routed to traditional full underwriting (exam and APS) - D. reported to law enforcement

11. The chapter says simplified-issue rates are higher than fully underwritten rates for the same healthy applicant because: - A. simplified issue covers larger face amounts - B. the insurer accepts a less-thoroughly-screened pool and prices for the lives that slip through - C. simplified issue is illegal in most states - D. healthy buyers prefer to overpay

12. A "nonsmoker" application returns a positive cotinine lab result. This creates: - A. only a pricing problem - B. only a disclosure (good-faith) problem - C. both a pricing problem (smoker mortality) and a disclosure problem (a misrepresentation) - D. no problem, since cotinine is unrelated to tobacco

13. Family history carries the most underwriting weight when it shows: - A. any disease at any age in any relative - B. early disease in close relatives (e.g., a parent's heart attack before ~60) - C. disease in relatives over 80 - D. only diseases the applicant has already developed

14. Under current U.S. law as the chapter describes it, the protections of GINA are strongest in: - A. life, disability, and long-term-care underwriting - B. health insurance and employment - C. property insurance - D. all lines equally

15. A simplified-issue product priced for an average pool is marketed straight at the unhealthiest buyers and runs far worse than priced. The failure is best described as: - A. a rating-table error - B. anti-selection through the distribution channel - C. a reinsurance shortfall - D. a reserving mistake

Short answer

16. In two or three sentences, explain why the length of a life policy (one-year term vs. thirty-year level term vs. whole life) changes how seriously you weigh a borderline impairment.

17. Distinguish what the MIB and the prescription-history check each contribute to a life file, and state the limit of each.

18. Explain the debit-and-credit method of building to a risk class, and give one example of two debits that should not simply be added because they are part of the same underlying condition.

19. State the central trade-off that runs across full underwriting, simplified issue, and guaranteed issue, naming the recurring book theme it illustrates.

20. Name one genuine benefit and one genuine danger of accelerated underwriting, and state the governance step that addresses the danger.

Answer key (try the questions first) **Multiple choice:** 1-B · 2-C · 3-C · 4-C · 5-B · 6-B · 7-B · 8-C · 9-C · 10-C · 11-B · 12-C · 13-B · 14-B · 15-B **16.** Mortality is priced at a *level* premium across the whole term, and it rises with age and can worsen as a condition progresses; on a one-year term a borderline impairment barely matters, but on a thirty-year or whole-life policy the same condition's trajectory over decades is locked into the price, so the longer promise weighs trajectory far more heavily. (§17.1) **17.** The **MIB** holds coded findings from *prior applications* across member insurers and catches inconsistency between what an applicant tells you and what they told someone else — but it diagnoses nothing; a code is a pointer to investigate. The **Rx history** lists recently filled prescriptions and is highly predictive because medications map to conditions — but it cannot show *why* a drug was prescribed or catch a condition managed without medication. (§17.2) **18.** You start the applicant at a baseline and add **debits** for impairments (heavy build, a treated condition, a hazardous avocation) and subtract **credits** for favorable factors (excellent labs, strong family history, demonstrated fitness); the net determines the class. Two debits that should *not* be summed blindly: high build *and* high blood pressure *and* high glucose are often one metabolic story, so summing them as independent strikes over-penalizes the correlated case. (§17.3) **19.** The trade-off is **underwriting depth versus adverse selection**: every step you remove from the evidence stack lets in more of the lives that most want coverage because they most expect to use it, and each step must be paid for in a higher price or a structural defense (the graded benefit). It illustrates Theme 2, *adverse selection is the enemy*. (§17.6) **20.** Benefit: it shrinks weeks to minutes for healthy applicants, widening access to needed protection (and freeing human judgment for hard cases). Danger: adverse selection through the fast lane *and* the model encoding proxy bias that recreates unlawful discrimination. Governance: random holdout exams and back-testing of accelerated lives (for selection), plus fairness review of the model's variables and documented FCRA adverse-action handling (for bias). (§17.7)