Your rights when an insurer takes an adverse underwriting action

Say you apply for life insurance and the answer is no, or yes at a price well above what you expected. The insurer has taken what the law calls an adverse underwriting action. What you are owed at that point is not a single right but a set of them that come from different laws, which overlap and which differ by state. They give you three things worth knowing about: a notice, a way to learn the reasons, and a way to see and challenge the information the insurer relied on.

This explainer covers what the notice looks like, how to ask for reasons, how to see the information, how the federal and state rules fit together, and where they differ. It is general information. For the rules in your state, the state insurance department is the authority.

What counts as an adverse underwriting action

There is no single national definition, so look at how the two main legal sources describe it.

The NAIC model act. The NAIC's Insurance Information and Privacy Protection Model Act (Model 670, from 1992) is the template that many states used for their own insurance privacy laws. In general terms it treats as adverse underwriting decisions a declination of coverage, a termination, an offer of coverage on less favorable terms than requested, or a higher charge than the standard rate. Not every state adopted the model, and the states that did vary in the details. The NAIC's page for the model lists the states that have adopted it.

The federal Fair Credit Reporting Act (FCRA). The FCRA applies when an insurer takes adverse action based in whole or in part on information in a consumer report. For insurance, adverse action includes denying coverage and increasing a charge for it. The reports an insurer typically uses in life underwriting, such as an MIB file or a prescription database check, are consumer reports. The overview of those reports is in privacy and your life insurance data: who sees it and your rights.

Common situations that fall within one or both:

• A decline of the application.
• An offer at a higher price than standard, for example with a table rating.
• An offer of a lower amount than you asked for.
• A postponement, in some descriptions, since the insurer will not offer now.
• An offer at a less favorable rate class than you applied for. Whether this counts as an adverse action can depend on the law and the facts, such as which data drove the result, so ask the insurer how it treats the situation.

You do not need to settle the legal definition to use your rights. If you are unhappy with the outcome and think a report or a record played a part, you can ask.

The notice you can expect

What arrives depends on the insurer, the outcome and the state, but the following are typical.

A decision letter or an offer letter. The insurer tells you, or your agent, that the application was declined or approved on different terms. This letter may be brief.

A notice under the FCRA, when a consumer report was used. Under the federal rules, the notice generally has to include:

• That the adverse action was taken, and by whom.
• The name, address and telephone number of the consumer reporting agency that supplied the report.
• A statement that the agency did not make the decision and cannot explain why it was made.
• Your right to obtain a free copy of the report from the agency if you ask within a stated period, generally 60 days.
• Your right to dispute the accuracy or completeness of information in the report.

If the notice names the MIB, you can follow the steps in The MIB report: what insurers know about your history; if it names a prescription reporting company, see how insurers check your prescription history.

A notice under state insurance privacy law, where it applies. In states that follow the NAIC model, an insurer that takes an adverse underwriting decision generally has to either give you the specific reasons in writing or tell you that you can ask for them, along with a summary of your rights to see and correct the recorded information. In some states the notice must also list the sources of the information.

What may be missing. Not every adverse action produces a long explanation. A decision letter might say only that the application was declined "based on medical information," with no detail. In that case, asking for the specific reasons is the next step.

If you receive no notice at all, ask your agent whether one should have been sent, and write to the insurer.

How to ask for the reasons

Asking is simple. Put it in writing, addressed to the insurer's underwriting or consumer affairs department, and send a copy through your agent. Keep it short.

I applied for life insurance on [date], application number [number]. On [date] I received notice that [the application was declined / coverage was offered at a higher rate]. I am requesting the specific reasons for this decision and the source of the information relied on. Please also tell me what information you hold about me and how I may obtain a copy of it, and which consumer reporting agencies, if any, supplied reports. Please respond in writing.

Some practical points:

• Quote your dates and number, so the request can be matched to your file.
• Name what you want: specific reasons, sources, and copies of the recorded information.
• Say you want a written reply. A phone conversation helps, but a letter is a record.
• Keep a copy and the date sent. Use a method that gives you proof of delivery if the matter is important.
• Be aware that the reasons may be brief. An insurer may list, for example, "elevated blood pressure readings" or "history of a specific condition". That is often enough to tell you what to follow up on.
• Expect that some medical information may be released through your doctor. Under the model act, an insurer may provide medical record information to a physician you designate instead of to you directly. This is a way to deliver sensitive diagnoses with a clinician present.

The deadlines for the insurer's reply differ from state to state, so none is stated here. Your state insurance department can tell you the period that applies.

How to see the information the insurer used

There are two layers to see, and they have different owners.

The consumer reports. Under the FCRA you can ask the reporting agency for a copy of your file. After an adverse action based on its report, you are entitled to a free copy if you ask within the period given in the notice. The MIB also provides a free copy once a year to everyone, and an additional free copy after an adverse decision involving an MIB record, according to MIB's consumer page. A walk-through of requesting these is in How to request your own MIB and prescription reports step by step.

The insurer's own file. In states with an insurance privacy law based on the model act, you can generally ask the insurer for access to recorded personal information it holds about you that was collected in connection with the application. Exceptions exist, for example for information relating to a claim or a legal proceeding, and for some medical information, as described above. In states that have not adopted the model act, the right may be narrower, or may come from other state provisions. Where no state law gives access, the insurer may still choose to share.

Your doctors' records. The insurer's copy of a medical record came from your doctor, and you can ask your doctor for the same record under the federal rule that gives patients access to their own records. Reading it shows you what the underwriter read. The delay you may see in this step, and why, is covered in attending physician statements and why they slow an application.

The lab results. Your exam and lab results are part of the file. Ask the insurer or your agent for a copy.

Correcting what is wrong

If you find an error, the route depends on where the error lives.

• In a consumer report, dispute it with the reporting agency, which must investigate and correct or delete what it cannot verify.
• In the insurer's own record, in states following the model act you can ask the insurer to correct, amend or delete the information. The insurer generally must respond within a stated period, either by making the change or by telling you why it refuses. If it refuses, you can usually submit a short statement of disagreement that stays with the file and goes to anyone who received the original information.
• In a medical record, ask your doctor for an amendment.

The detailed questions and answers are in questions about disputing a wrong entry in your underwriting file. Once corrected, ask the insurer in writing to reconsider with the new facts. Nothing in the general rules requires it to change its decision, but a documented correction is how most reconsiderations start. The guide on asking for a better rate class later covers asking for a better class.

Where the rules differ

The reason this topic is confusing is that the sources of rights are not uniform.

Genetic information deserves a separate line. The federal Genetic Information Nondiscrimination Act does not cover life insurance, so protections come from state law, which varies; see privacy and your life insurance data: who sees it and your rights for pointers.

Because the structure varies, two applicants with the same outcome may have different rights. If you are unsure which rules apply, the state insurance department's consumer line can tell you, and the NAIC's page for the model act shows whether your state adopted it.

A hypothetical example

Say Mei, 47, applies for $500,000 of term coverage. A week after her exam, her agent calls to say the insurer will offer coverage only at a rated price, roughly 50 percent above standard. This is an illustration.

1. Mei asks for the reasons in writing. The insurer replies that its decision reflected a prescription history that suggested a heart condition and a cholesterol reading outside its limit for the class.
2. Mei looks at the prescription report. A notice names the reporting company. She requests her free copy. It shows a heart-rhythm medication filled four times three years ago. Mei remembers it was prescribed for a short episode, which her cardiologist concluded was benign.
3. She gets her cardiologist's letter. The letter records the diagnosis, the evaluation and the doctor's conclusion that no treatment has been needed since.
4. She sends the insurer the letter and asks for reconsideration. She also provides her recent cholesterol results from her own doctor.
5. The insurer reviews. In this illustration the letter changes the underwriter's view of the heart item and the offer comes back at a better class. The cholesterol reading still affects the price.

Not every case ends this way. If the diagnosis is real and current, the same documents support the rating. The value of the process is that Mei knew what the decision rested on and could answer it.

What to do, in order

1. Read the notice, and note any deadline, especially the period to request a free copy of a report.
2. Write to the insurer for the specific reasons and the information used.
3. Request the reports named in the notice, and look for errors.
4. Ask your doctors for the records the insurer saw, if the decision turned on them.
5. Correct genuine errors through the right source.
6. Ask the insurer to reconsider, with the corrected information attached.
7. Look at other insurers and other products. Guidelines differ, and the next application must disclose the previous decision. A step-by-step plan is in the 90 days after a decline: a step-by-step plan, and the guide to Declined for life insurance? What to do next lists the options.
8. Complain if the insurer will not respond. The state insurance department handles it; see how to file a complaint against a life insurer.

Key takeaways

• An adverse underwriting action includes a decline, a higher price or less coverage than requested, and your rights come from the FCRA, state insurance privacy laws and, for medical records, the health privacy rule.
• If a consumer report was used, expect a notice naming the reporting agency, with your right to a free copy generally within 60 days and your right to dispute.
• In states with a law based on the NAIC model, you can generally ask the insurer for the specific reasons, access to recorded information and correction; not every state has adopted it, so check yours.
• Ask in writing, quote your dates and application number, and request the sources of information as well as the reasons.
• Nothing requires an insurer to reverse a decision after a correction, but documented corrections are how reconsiderations and better offers from other insurers usually begin.