Anytime someone applies for life insurance; they go through an underwriting process. For traditional life insurance products like Term and Universal Life insurance, the applicant sometimes must undergo an insurance medical exam and a blood and urine analysis. However, when you apply for life insurance and the application calls for no medical exam or blood and urine test, the insurer will always order a report from the Medical Information Bureau (MIB).
What is a Medical Information Bureau?
Founded in 1902, the Medical Information Bureau (MIB) was established to help member life insurance companies to help combat fraud.
The MIB does this by putting together data from all your prior life, health, long-term care, or disability insurance applications. This only works for applicants who have applied for insurance once before because the bureau does not keep medical information files for everyone, only those who have applied for insurance at least once.
For individuals who are nervous about their privacy possibly being violated, there’s simply no reason to be alarmed. Rather than keeping genuine medical records on file, the information at the MIB is coded in a manner that represents medical and avocational information that is important to the insurance underwriting process, and there aren’t any individual and personal descriptions that might be utilized in identity theft. Your information is never transmitted to the insurance underwriter unless you give your written permission, and all of this information falls under the federal HIPAA regulations.
How is the Information Used?
Your MIB report that is submitted to an insurance underwriter provides information regarding your insurance applications for the last 6 months or more. It also accumulates your health information that you may have left off of your insurance application or was not obvious to the underwriter by any other methods – like your insurance medical exam.
The kind of information that your MIB report is likely to include is:
- The dates of any previous insurance applications that you have submitted
- Any medical issues that were listed on the application
- The diagnosis and any subsequent treatment for these medical issues
- The type of treatment you received
- Where the medical information came from
For instance, let’s suppose you are a life insurance applicant that had breast cancer and had surgery and chemotherapy. If you completed an application for life insurance prior to this, that surgery and chemotherapy would have easily been found by the insurance underwriter by reviewing your medical history, and so that information would be entered into your MIB report.
Now, suppose you decide to apply for insurance once again. The new insurance underwriter would find out from the coded report that the breast surgery and chemotherapy treatment occurred, when the surgery was performed, and how that information was obtained (for example, an Attending Physician Statement).
The underwriter would then use that information in conjunction with other information like the medical exam, attending physician statements, a prescription search – to make certain that every aspect coincides and the new application hasn’t ignored any important information regarding your health history.
Why do Insurers rely on the Medical Information Bureau
Life insurance companies and their underwriters calculate how much your insurance rates will be depending on how much risk you present – how likely it may be for you to die for the duration of your coverage. For this reason, the underwriter will order things like your driving record and attending physician statement from your doctor; they are looking to identify what your health history has been like and if you participate in any risky hobbies, travel or occupation.
Although you will certainly be as honest as possible with your underwriter about things like failing a drug test, not everyone will be. You should understand that if you have applied for life insurance before, that underwriting information doesn’t just go away if you decided not to purchase the policy. Unethical applicants might “accidentally” omit that failed drug test, understanding that it could affect their ability to get the lowest rates.
Obviously, applying for life insurance in the past isn’t fundamentally a negative thing; perhaps you decided after applying that it wasn’t in your price range, or you decided to purchase through a different carrier.
Furthermore, MIB records don’t even reveal if your last application was declined. Nevertheless, the current insurance underwriter needs to identify what was uncovered during previous applications just in case any essential information was omitted on your current application.
By using the medical information bureau, the insurer helps combat fraud. They will certainly not give their lower rates to anyone whose history indicated that they ought to have been paying a lot more for their policy. Properly rating applicants helps to keep insurance costs in check and consumers as a whole will benefit from this valuable information.