How Does the Medical Information Bureau Affect Life Insurance Underwriting?


How Does the Medical Information Bureau Affect Life Insurance Underwriting?

The advent of the Internet has made long-standing underwriting processes easier and more accurate. Most of the investigative efforts involve determining the applicant’s probability of living a long life according to the standardized mortality tables. Actual death statistics are gathered each year to establish the average lifespan for men and women who die from natural causes, accidents and illness. In the early 1900s, the Medical Information Bureau, or MIB, was established to gather medical profile information about individuals.


What is the MIB?


Member companies own the Medical Information Bureau, which is designed to manage an enormous database of health-related information. New insurance applicants provide information on an application, which is validated against the stored information.


·         Industry owned – Consumers should realize the importance of this independent source of medical records that are separate from any government entity. Accuracy in this information is more likely since the insurance companies depend on the entries to establish the risk levels for each life insurance policy.

·         Consumer reporting – All information requested in the underwriting process is provided on the MIB report. The underwriter refers to the coded entries to determine the specific medical conditions in the applicant’s health history. Information provided is held in the strictest confidence and is never provided to another party.

·         Fraud prevention – Insurance underwriters work diligently to validate the applicant’s existence and health history. Due diligence prevents unacceptable levels of risk to the insurance company. Careful underwriting practices ensure that every insurance policy is attached to a living person.


Standard Use of the MIB


All health-related insurance applications will trigger use of the MIB. Individuals who have never applied for any type of health or life insurance, such as disability, critical illness, long-term care, will not have entries. Industry membership in the MIB includes almost 80 percent of all health and disability insurance policies and 99 percent of all life insurance policies.


·         Medical conditions – Personal medical history plays an important role in the underwriter’s assessment of the risk presented to the insurer. An applicant might mention a certain heart condition. The MIB entry will provide the exact medical code that carries a risk rating. Tiny details play important roles in the risk assessment for every policy.

·         Risky activities – An applicant who participates in high risk sports, such as mountain climbing, spelunking and skydiving, might be noticed because of treatment for injuries. The MIB contains important lifestyle information that clarifies the underwriter’s assessments.

·         Other applications – In most cases, the underwriter wants to know if the applicant has encountered application denials from other insurers. The MIB offers invaluable information about the applicant’s encounters with other MIB member organizations.


Maintains Insurance Industry Integrity


Few industries rely on consumer opinion in the same manner as the insurance industry. Fraudulent activity in the application process would cause extensive issues for the insurer that fell prey to the scoundrels. Diligent underwriting processes protect everyone involved from the policyholders and insurers to the beneficiaries.


·         Heavily regulated – Every state has an insurance board that imposes strict controls over the companies with licenses to sell life insurance in the state. Quarterly reviews are conducted to prove that the insurance company has sufficient liquidity to meet anticipated obligations, such as payouts of death benefits. Complying with state regulations includes avoiding questionable applications that would present unacceptable risk levels to the insurer.

·         Consumer trust – Applicants might question the need to delve into the medical information recorded in the MIB. Proper risk assessment for all applicants restrains the cost of life insurance coverage for everyone. Classes of insurance are maintained to charge fair annual premiums to everyone in the class. Fraudulent policies in the class would increase the cost of life insurance when claim activity increases.

·         Long-term protection – Consumers believe that a life insurance company is going to be healthy and able to pay claims no matter how long the policy is in force. Diligent underwriting practices support this belief. Unnecessary risk would place the insurer in jeopardy of becoming insolvent.


Advantageous to Everyone


At first glance, the Medical Information Bureau appears to be another attempt to invade the individual’s privacy. In reality, the insurance industry uses the MIB to preserve the integrity of one of the oldest industries in the economy. Mitigation of risk is essential when the unthinkable happens. Beneficiaries and survivors should never question whether the insurance company is going to default on the obligation to pay the life insurance claim.


Careful underwriting processes allow the insurance company to assess risk before placing the policy in force. As a legal contract, the life insurance policy is a signed agreement between the policyholder and the insurer. As such, the policyholder trusts the insurance company to have accepted the risk of insuring his life.

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