Final answer:
In situations where the insurer approves a policy with conditions, the type of policy delivery is known as a conditional receipt. It mandates specific terms to be met by the proposed insured for the policy to be effective. This both mitigates moral hazard and ensures accurate risk assessment within a risk group.
Step-by-step explanation:
The type of policy delivery that an agent should make when an insurer approves a policy with conditions that the applicant must meet before delivery is official is known as a conditional receipt. This term refers to a document provided by an insurance company that stipulates the specific conditions that must be fulfilled by the proposed insured before the insurance coverage becomes effective. It acts as a form of collateral to the transaction, aiming to protect both the insurer from potential moral hazard and the insured from unforeseen, detrimental events, until all conditions are met and the policy is fully in effect.
An example of such a condition could be the requirement for the applicant to undergo a medical examination. This kind of arrangement is not uncommon in the insurance industry and is a method of protecting the insurance entity against risks that are shared by members of a particular risk group. The insurance premiums paid by the policyholders contribute to a pool that is used to remunerate any member who suffers a significant financial loss due to a covered event, and the conditional policy delivery ensures the correct risk assessment and underwriting process has been followed.