4. Health and care products - Group products

Question 1

Group cover can arise

Answer 1

• employer pays entire premium on behalf of employee
• risk-sharing arrangement between two parties
• employer facilitates payroll deduction
• group is linked to membership (not employment)

Question 2

Why employer purchase group cover

Answer 2

• seen as valuable benefit as part of overall benefits package to attract and retain good quality staff
• promote health and wellbeing in the workplace
• legal requirement
• employer pays whole premium - good benefit at time of recruitment
• assist those who may not be able to get cover on their own (blue-collar occupation)
• administrative benefit if payroll deduction
• greater perceived value to employee than costs (more favourable group underwriting and pricing)
• paternalism: in industry with higher than normal occupational risk, employer will want to ensure workers are adequately protected
• PMI - ensure acute conditions treated promptly, facilitate speedy return to work
• improved quality of treatment, employees more satisfied and productive
• CI - finance time-off work where required for recover

Question 3

Factors to consider in setting FCL

Answer 3

• scope for anti-selection (size of group, membership)
• average benefit/ sum assured
• underwriting costs
• regulation
• competitor practices

Question 4

Risk equalisation funds

Answer 4

• developed to allow for cross-subsidisation
• premium rates based on risk profile of members across all groups
• groups with healthier members contribute excess premiums to REF
• used to subsidise claims of group with high risk