5.3 The Application
The application is defined as a "form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued. It gives information to the home office underwriting department, so it may consider whether an insurance policy will be issued, and if so, in what classification and at what premium rate."
The application is the basic source of insurability information. Regardless of what other sources of information an underwriter will draw from, this is the first source to be reviewed and will be evaluated thoroughly.
What is the purpose of the insurance application form?
The application provides the insurance company with necessary information regarding the insured's age, address, health history and other factors. This information is important so that the insurance company can properly determine if the applicant meets their underwriting rules and can determine the proper premium.
What type of information is requested on the application?
There is a series of questions on the application that provide information for underwriting the policy. These questions include name, address, age, height, weight, sex, occupation, earnings, beneficiary, insurance history and medical history.
There are basically three sections in a typical life insurance application:
- Part I - General
- Part II - Medical
- Part III - Agent's Report
An agent used to be able to accept an application by mail or by phone as long as the applicant signed the application; however, that is no longer the case. An agent must assist the purchaser in person during the process of completing the application. The reason for this is that the agent will be able to make certain observations that aren't available to the underwriter. Sometimes visual observations can tell things that are not included in the Agent's Report. Once the application has been completed, the agent cannot make any changes to it without requiring the applicant to initial the changes.
For instance, Brittany realized she put the wrong home phone number on the application and she wants her agent to correct it. Even though this change isn't anything that will affect the underwriting process, the agent still cannot legally make the change. He can write it down, but he still needs to get Brittany's initials witnessing that she actually approved the change.
As a matter of fact, several signatures must be obtained in order to complete the application. It must, of course, contain the signature of the applicant (policyowner) and if the policyowner is not the same as the proposed insured, the application must contain the proposed insured's signature as well. If the policy is taken out on the life of a child (under age 15), the application must be signed by a parent or legal guardian. If the application is for a business entity, the application must contain signatures of one or more partners or officers of the company.
It is an unfair trade practice to willfully submit to an insurer an application for insurance or policy-related document that contains a false or fraudulent signature. Doing so is a third-degree felony and subject to $5,000 for each non-willful violation and $75,000 for each willful violation.
The soliciting agent's signature MUST appear on the application. Any additional questionnaires or forms must be signed as well such as medical release forms, automatic payment plan documents, etc. In Florida, the name of the insurance company and the agent's name and license identification number must also appear on the application.
Remember: The application must contain the name of the insurance company, the name of the soliciting agent, and the agent's I.D. number.
How does the law define misrepresentation in insurance applications?
1. Knowingly making false or fraudulent statements or representations on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurance company, agent, broker or individual.
2. Knowingly making a material omission in the comparison of a life, health, or Medicare supplement insurance replacement policy with the policy it replaces for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual. A material omission includes the failure to advise the insured of the existence and operation of a preexisting condition clause in the replacement policy.
