Life Insurance and the Medical Information Bureau
If you’ve applied for life insurance in the last 7 years, the Medical Information Bureau (MIB) most likely has a file on you. You probably didn’t know that such a file existed or that the MIB existed for that matter, but the MIB plays an important role in the life insurance industry. It allows member insurance companies to exchange underwriting information between one another in an effort to prevent loss due to fraud or omission. But how does the MIB help the industry and consumers?
What is the Medical Information Bureau?
The Medical Information Bureau is a non-profit organization made up of over 600 insurance members comprised of insurance companies. Its main purpose is to provide for the exchange of underwriting information among its members. By sharing information, it reduces the risk of insurance fraud and increases the overall accuracy of underwriting.
How Does the MIB Work?
When you apply for life insurance with a member firm, your relevant medical and avocation (hobbies and lifestyle) underwriting information is sent to the MIB. The MIB uses a proprietary coding system when adding your information to its database to protect your privacy. Your file does not state whether or not you were approved for insurance or what rating you received. It simply shows any relevant underwriting data that might be significant in the underwriting process. Your underwriting information is maintained in a file by the MIB so that other member companies can review it if you apply for life insurance with another company. It will alert the insurance company of any major discrepancies in your application.
An Example of the MIB in Action
Let’s say, Mr. Smith applies to ABC Insurance and is given a substandard rating because he disclosed on his application that he has severe asthma. Because he received a substandard rating, he is unable to afford the premiums from ABC Insurance. So Mr. Smith decides to apply with XYZ Insurance but does not disclose his asthma condition in an effort to get a better rating. Since the MIB shares information among its members, XYZ Insurance would know that Mr. Smith already applied with ABC Insurance and disclosed that he had asthma, raising a red flag immediately.
Facts about your file
When you sign a life insurance application, you are agreeing to two things when it comes to the MIB. One, you are allowing the insurance company to look up any existing records you might have with the MIB. Two, you are allowing the insurance company to share your information with the MIB. Your MIB records are held for 7 years and then purged. The MIB keeps your information private and only shares it with its members. It never sells your information to any third party vendors who are not member companies.
If you’ve applied for life insurance in past and you want to know what’s in your MIB file, you are entitled to a free copy. If you would like a free copy of your MIB report, click here.
If you’ve applied for life insurance in the past, it is most likely that your file will not contain any medical or avocation codes if you qualified for a ‘standard’ or better rating. The files are meant to flag more serious underwriting data such as moderate health impairments and high risk lifestyle habits.
Why the MIB is Helpful to the Industry and Consumer
The MIB’s role in the life insurance industry can keep insurance costs in check and make the process of securing life insurance more efficient. Because it allows companies to cross reference underwriting files, the MIB can cut down on potential insurance fraud. This essentially keeps the cost of insurance down as too many fraudulent claims would surely raise rates. The exchange of information that the MIB provides can also accelerate the consideration of an application and reduce the cost of processing an application.
Conclusion
Some people might feel uncomfortable knowing that an organization like the MIB maintains underwriting information about them. But the fact is that the MIB provides a valuable service to the industry as well as the consumer without compromising the confidentiality of the information in its database. If you have any questions about the MIB, fell free to call us at (888) 687-9444 or email us at info@archstoneagency.com.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
