SECTION X - Insurance Application and Receipts
Sales Presentations
Life insurance sale presentations usually begin with information gathering, a needs analysis, and a review of the applicant's existing life insurance coverages. Once needs and goals are clear, and the unmet insurance need has been brought into focus, the agent will usually make a sales proposal which consists of one or more specific recommendations.

Life insurance sales do not occur in a vacuum. Rarely does an applicant step forward and request a specific type of policy and specific amount of insurance. Rarely would an insurance agent proceed with an application on the basis of such a request without further discussion about the applicant's situation, insurance needs, and existing insurance coverages. In most cases, life insurance must be sold to an applicant, often depending upon making a convincing sales proposal.

There are two reasons why an agent should not hastily conclude a life insurance sale without exploring the applicant's overall needs and current insurance status:

An agent has a duty to act in the best interests of the applicant and to recommend appropriate types and amounts of coverage.
Sales opportunities could be lost if an agent fails to fully explore and expose an applicant's unmet insurance need.
Sales presentations are sometimes concluded in a single session, but successful presentations frequently consist of at least two separate sessions. Generally, the first session is exploratory in nature. The agent asks probing questions and has an opportunity to assist in determining the applicant's actual insurance needs and goals. Once the overall insurance need has been clarified, it is extremely important to review an applicant's existing insurance coverages.

The information gathered will help the agent to analyze the situation. The agent will try to determine the applicant's immediate vs. long-term need for insurance, how much the applicant can afford to pay (or is willing to pay) for insurance, how much the applicant is currently paying for insurance, and how appropriate existing coverages are in satisfying the applicant's overall needs.

The sales proposal itself is usually made in a subsequent session, after the agent has taken some time to analyze all of this information and to prepare alternative recommendations. The primary proposal should focus on the applicant's general unmet needs with a realistic balance between cost, benefits, and affordability.

Formal proposals consisting of typewritten comparisons of alternatives or computer printouts are usually more effective than hand written proposals, because they are neater and appear much more professional. Once a specific proposal is accepted by a proposed buyer, the insurance application process begins.

Applications
When an application is taken, the agent is responsible for making sure that all questions are answered completely and accurately. Applications contain information about the policy being applied for, existing insurance, and the applicant's personal health history and family history. Much of this information is used in the underwriting process and the application itself usually is attached to, and becomes a part of the actual insurance policy itself.

Information Practices
As part of the application process, an agent may be required to provide to the applicant a Notice of Insurance Information Practices. Specific requirements vary by state, but state laws are generally based on two federal laws, the Fair Credit Reporting Act and the Privacy Act. Generally, these laws regulate the use and disclosure of insurance information, specify the types of information that may be included in investigative reports, prohibit certain types of information, establish procedures under which consumers may gain access to and challenge inaccurate information, and impose penalties for violations of permitted information practices. Since federal law sets minimum requirements, where specific state laws have been passed they are often more stringent in some areas than federal law.

Notices are also usually required in connection with policy reinstatements or requests for increases in benefits. These notices typically explain the types of information to be collected, the sources used for gathering information, the parties who will have access to the information, and persons to whom the information might be disclosed without the applicant's prior authorization. Recent privacy legislation contained in HIPAA imposes further responsibilities on agents when dealing with private information of clients.

In cases where specific investigative reports are prepared or information is to be obtained through interviews with persons other than the applicant, a specific notice must be given at the time information gathering begins - this is usually mailed by the insurance company. Other notices may be required to be provided when a policy is delivered by the agent.

Information Disclosure Authorization Forms are frequently included in, or are used in conjunction with, insurance applications. These forms are signed by the applicant and authorize physicians, hospitals, or other medical practitioners to release medical information about the proposed insured to the insurance company. The forms also explain that the information is generally confidential, but may be released to certain parties, such as the Medical Information Bureau, any reinsurance companies involved, and any other insurance company to which a claim has been submitted concerning the applicant's life or health.

An applicant's signature on a disclosure authorization form is usually effective for a limited period of time (typically two or three years). After this period expires, the insurer would have to obtain a new authorization before it could engage in such information gathering practices. Once a policy has been issued, subsequent needs for information gathering are usually triggered by a specific event - such as a policy lapse and reinstatement, a request for increased benefits, or a claim.

The privacy and information practice laws are designed to protect consumers against the improper use of information, and from the negative consequences of incorrect information. If a person's application for insurance is turned down on the basis of the information contained in an investigative report, that person has the right of access to the information, a right to know to whom it was distributed, and a right to challenge the information and request that a correction be made.