A company�s field force is the foundation of the selection process. The other parts of the selection mechanism can go into operation only after the field force has acted. The home office can exercise its underwriting judgment only on the risks submitted by the agents and brokers. A company�s overall selection process can be no stronger than its agency force. If agents submit consistently good business, the underwriting results will be favorable; if they submit consistently below-average risks, the underwriting results will be no better.

Most companies give their agents explicit instructions about the types of risks that will or will not be acceptable, and they instruct the agents to solicit only those risks they believe to be eligible under the company�s underwriting rules. Where eligibility for insurance is doubtful in any way, some companies, in order to save unnecessary expense and trouble, require the agent to submit a preliminary statement setting forth the facts of the case and the grounds upon which the doubt as to insurability is based. Some companies require a preliminary statement in all cases where an application for insurance in any company has been declined, postponed, or accepted at other than standard rates.

The agent is asked to supply a variety of information in the certificate, the details varying with the company. The information typically includes the following: how long and how well the agent has known the applicant; an estimate of the applicant�s net worth and annual income; the applicant�s existing and pending insurance, including any plans for the lapse or surrender of existing insurance; whether the applicant sought the insurance or whether the application was the result of solicitation by the agent; and whether the application came through another agent or broker.

The degree of selection exercised at the field level depends on the integrity and reliability of the agents and brokers. There is clearly some selection involved, since self-interest would cause the agent not to solicit insurance from persons who�because of obvious physical impairments, moral deficiencies, or unacceptable occupations�manifestly could not meet the underwriting standards of the company. Beyond that, the amount of selection practiced by the agent is rather limited. Since the agent�s compensation depends on the amount of insurance he or she sells, the motive exists to submit any application, even though it is borderline, that stands a chance of being accepted. Hence the responsibility for applying the company�s underwriting standards falls to the home office underwriters, who do not labor under the same conflicts of interest.

The agent is usually the only company representative to see an applicant face-to-face and make a visual assessment. If there is anything unusual about the applicant that requires an explanation, it is up to the agent to convey that information to the home office. For example, a person whose weight is high for the given age and height could be very muscular rather than obese. The agent can include this information with the report that accompanies the application.

Experienced agents know what types of additional information the home office underwriters are likely to request when the application reveals specific health problems. These agents can expedite the process by asking for the supplemental reports at the same time the application is completed. Otherwise, the reports will not be generated until the home office staff has made a preliminary evaluation of the case and forwarded a request to the agent for the needed information. In some cases, the first supplemental report triggers a request for additional supplemental reports.

The home office evaluation is usually very expeditious if all the information needed to make the evaluation accompanies the application. The time needed to approve, reject, or rate the case can be extended by months if there is difficulty in obtaining reports, such as attending physician statements.

Another advantage that some experienced agents have is a reputation with the home office underwriters for thoroughness, accuracy, and attention to detail in furnishing applications and supporting documents. This reputation can benefit applicants who are on the borderline between classifications and can be rated either way. They may get the benefit of the lower premium class because of their agent�s reputation. Borderline cases from agents who always argue with the home office evaluation and send applications with less than complete information are more likely to be classified under the higher premium category when it is strictly a judgment call.

Much of the information a company needs to underwrite a case is supplied by the applicant. This information is contained in the application, which constitutes an important part of the offer and acceptance process and will become part of the contract if the policy is issued. Application blanks vary in their content and design, but they usually consist of two parts�the first containing nonmedical questions and the second including questions to be asked by the medical examiner. (Many companies permit the agent to ask the medical questions subject to age and amount limitations under "nonmedical" programs, which are discussed later in this chapter.)

Statements made by the applicant in the first part of the application cover the particulars of identification, such as name, address, former and prospective places of residence, and place and date of birth. If the applicant has recently moved, including previous places of residence enables the company, through reporting services, to interview the applicant�s former acquaintances. (The importance of obtaining the correct date of birth was explained in the previous chapter.)

Additional questions in the first part of the application relate to the applicant�s occupation, including any changes within the last 5 years or any contemplated changes of occupation; aviation activities other than passenger travel on regularly scheduled airlines (if there is any unusual aviation hazard, details must be provided in a supplementary form); and the possibility of foreign residence. The application also elicits information about the applicant�s insurance history including details of all insurance already in force, as well as declinations and other insurance company actions of underwriting significance.

The foregoing information�together with a statement of the amount of insurance applied for, the plan upon which it is to be issued, the names of the policy beneficiary and policyowner, and the respective rights of the insured, beneficiary, and policyowner as to control of the policy�completes the first part of the application. This section is usually filled out by the agent on behalf of the applicant, who must sign it and certify the correctness of the information. The applicant�s signature is generally witnessed by the agent.

The answers to questions in the second part of the application normally must be recorded in the medical examiner�s handwriting, and the applicant must sign the form to attest to the completeness and accuracy of its contents. This part of the application asks several groups of related questions. The first group seeks the details of the applicant�s health record, including illnesses, injuries, and surgical operations, usually within the last 10 years. The applicant is also required to give the name of every physician or practitioner consulted within a specified period of time (usually the last 5 years) in connection with any ailment whatsoever. The second group of questions elicits information about the applicant�s present physical condition. There are questions about the applicant�s use of alcohol and drugs, and other questions concerning the applicant�s family history.

In addition to recording the answers to part 2 of the application, the medical examiner is required to file a separate report or certificate, which accompanies the application but is not seen by the applicant. The first portion of the report contains a description of the applicant�s physical characteristics, which not only provides useful underwriting information but also guards against substituting a healthy person for an unhealthy applicant in the medical examination. Some companies ask the examiner to review the applicant�s driver�s license or other form of identification to establish conclusive identification. The examiner is also usually asked to indicate whether the applicant looks older than the age stated.

The basic purpose of the medical examiner�s report is to transmit the findings of the physical examination. The medical examiner�s comments are specifically required regarding any abnormalities of the applicant�s arteries or veins, heart, respiratory system, nervous system, abdomen, genitourinary system, ears, eyes, and skin. The examiner also reports the urinalysis result, certifies that the urine examined is authentic, describes the applicant�s build, and indicates the applicant�s blood pressure.

In the final section of the report, the examiner may be requested to indicate any knowledge or suspicion that the applicant abuses alcohol or narcotics or has any moral deficiencies that would affect his or her insurability. The examiner is also asked about the prior patient/doctor relationship that has existed between the two of them, if any.

The medical examiner�s report is considered to be the property of the insurance company and is carefully safeguarded at all times.

Attending physicians are a source of information on applicants who have undergone medical treatment prior to applying for insurance. When it appears that the information in the attending physician�s files might influence the insurance company�s underwriting decision, such information is sought as a matter of routine, only, however, after the application has been signed because it gives the insurer consent to seek medical and personal information. Insurance companies have enjoyed a remarkable degree of cooperation from the medical profession regarding inquiries of this nature, with physicians normally providing all of the relevant information in their files. However, their response is not always prompt, and their delay suspends the policy issuance process. To expedite the physician�s response, insurers usually send a check along with the letter of inquiry to cover the physician�s expenses incurred to supply the information.

Insurance companies attempt to verify all information from the previously mentioned sources, generally in one of two ways. The first method is through telephone interviews conducted by insurance company staff which allows the insurer to structure the questions to best serve its purposes. The second alternative is to employ the services of an independent reporting agency. The unique advantage of these independent investigations is that they provide an evaluation of the applicant by a source having no interest in the outcome of the application.

The insurer�s home office or its local agency may make the request for an inspection report. In either case, the report is filed directly with the insurance company�s home office. Under provisions of the Fair Credit Reporting Act the applicant has the right to review the contents of the report at the offices of the agency that produced it.

The thoroughness of the inspection depends on the amount of insurance involved. When the amount of insurance is not large, the report is rather brief, commenting in a general way on the applicant�s health, habits, finances, environment, and reputation. When a large amount has been applied for, the report tends to be comprehensive. It reflects the results of interviews with the applicant�s neighbors, employer, banker, business associates, and others. The inspection focuses particularly on the applicant�s business and personal ethics. The report calls attention to any bankruptcies and fire losses, and it comments on the applicant�s use of alcohol, drugs, and other departures from "normal" social behavior. The inspection also occasionally uncovers physical impairments that were not revealed in the medical examiner�s report.

A final source of information is the Medical Information Bureau (MIB). This organization is a clearing house for confidential medical data on applicants for life insurance. The information is reported and maintained in code symbols to help preserve its confidentiality.

Companies that are members of the Bureau are expected to report any impairments designated on the official list. The designated impairments are related primarily to the applicant�s physical condition but also include hereditary characteristics and addiction to alcohol and narcotics. If they have a bearing on insurability, any suspicious tendencies revealed in an examination are reported in order to bring the matter to the notice of all companies using the Bureau�s records. All impairments must be reported whether the company accepts, postpones, or declines the risk, or offers a modified plan of insurance. In no event does the company report its underwriting decision to the Bureau.

A company normally screens all of its applicants against the MIB file of reported impairments. If the company finds an impairment and wants further details, it must submit its request through the MIB, but only after it first conducts its own complete investigation from all known sources. The company that reported the impairment is not obligated to supply further information, but if it agrees to do so, it provides the requested information through the MIB.

It should be emphasized that there is no basis for the widespread belief that a person who is recorded in the MIB files cannot obtain insurance at standard rates. The information contained therein is treated like underwriting data from any other source and, in the final analysis, may be outweighed by favorable factors. In many cases, it will enable a company to take favorable action, since favorable medical test results are reported as well as unfavorable ones. In any case, the rules of the MIB stipulate that a company cannot take unfavorable underwriting action solely on the basis of the information in the MIB files. In other words, the company must be in possession of other unfavorable underwriting facts or else determine through its own channels of investigation that the condition of impairment recorded in the MIB files is substantial enough to warrant an unfavorable decision.