CH 4 (WM) Flashcards
Define a Group Scheme. [2.25]
- A group scheme is defined as any collection of individuals✓ who combine to make a single proposal✓ for uniform insurance cover✓.
- Group schemes are most commonly✓ set up by employers for their employees✓, in which case the employer is the PH✓ even though those insured are the employees✓.
- Membership may be compulsory or voluntary.✓✓
Describe some of the different ways of how group products can arise. [2.5]
- The employer pays the whole premium obo the ee’s.✓✓
- Where the cost is shared between the two parties✓ (the e’r may pay for part or all of the e’e cost but the member must pay for any cover coverage desired for spouse or children).✓✓
- Where the e’r facilitates with payroll deduction, but the e’e pays all costs.✓✓
- Where the “group” is not employment-based✓ but for example linked to club membership✓ or credit cards.✓
State the different factors to be considered during the product design and control design when considering group schemes sponsored by an employer. [2]
- The purposes of the product ✓✓
- the UW and acceptance procedure ✓✓
- the methodology for pricing ✓✓
- its manner of distribution ✓✓
State the purposes of group insurance. [3.5]
- May be a legal requirement✓✓ (e.g. PMI in some territories).✓
- Can promote health and ensure a speedy return to work✓✓ (e.g. group PMI)✓
- May be used as a positive message to employees at the time of recruitment / promotion✓✓ (e.g. group CI or group PMI)✓✓
- May have tax advantages over individual product.✓✓ In this case the e’r can offer a benefit that has a greater perceived value to the e’e rather than its cost to the e’r.✓✓
*Prefix “Group” for all work-related examples.”
Define a flexible benefit scheme. [4]
- Are schemes offered by employers✓ that give employees the choice✓ of which benefits to select from a list✓ offered by the employer.
- There will be a list of core benefits, on top of which the individual can then purchase additional types of benefits from the further options available.✓✓
- Each benefit bring its own tax considerations, either i.r.o. premiums contributed or on the benefits when paid.✓✓
- FBS’s give ee’s greater flexibility to match benefits to their needs.✓✓
- However they present insurers with problems of anti-selection and increased admin.✓✓
- and there are also difficulties in determining basic risk costs.✓
- Insurer may impose limits and other restrictions on the choice of such benefits.✓✓
- Also known as flex schemes or cafeteria benefits.✓✓
Define “free cover”. [2.75]
- Refers to a benefit level in a group arrangement, below which the member is not subject to individual UW.✓✓
- It applies to group CI schemes✓.
- Only those seeking benefits above the limit need to provide medical info or undergo tests.✓✓
- This will apply to certain large groups where the number of risk units covered is sufficiently big to treat it as a separate insurance unit, with no single insured being significant.✓✓✓
- FC is usually a function of the number of members, or the aggregate of benefits provided.✓✓
- FCLs are also known as “non-selection limits”.✓
What are the advantages of free cover? [0.75]
Reduced UW costs✓ and faster application process✓
for most members in the group✓.
What is the aim of free cover? [1]
- to reduce the cost of UW to the insurer✓✓, and
- to avoid inconveniencing the client by asking too many people to be medically examined✓✓.
How does the benefits and exclusions under a Group PMI contract compare to that of an Individual Life policy. [1]
Benefits and exclusions are generally similar between group and individual products✓✓,
although pre-ex conditions are more likely to be covered under group business due to the lower degree of anti-selection likely to be encountered.✓✓
Describe how Group PMI cover may be customized per employer group. [2.5]
- There is often greater scope for customizing benefits for larger groups to meet their requirements✓✓,
- Example, choose specific levels of excess or limits✓✓,
- or choose certain benefits not available on standard PMI products✓✓
- (e.g. dental cover or prescription fees)✓
- Exclude certain benefits it may not require✓✓
- (e.g. psychiatric treatment, certain complimentary treatments.)✓
What are the key requirements to establish a group CI scheme? [1.75]
There is a clear definition of who is eligible for benefits under the scheme.✓✓
The benefits under the scheme are clearly defined✓✓:
- By size ✓
- By def’n of a valid claim ✓
- By the period of the benefit (if applicable) ✓
Acronym: BUS
What are the purposes of a group CI scheme? [2]
- It will be seen as a valuable benefit by staff✓ and can be used by employer as part of the overall benefits package to attract and retain staff.✓✓
- Equally, groups of employees, trade unions and members of associations such as motoring organisations might buy it.✓✓✓✓
- The benefit can be provided to those ee’s and individuals for whom IP insurance is not available✓✓,
- incl. some blue-collar occupations✓, and
- is of particular value when TPD cover is included.✓
How can the insurer reduce the risk of anti-selection for group scheme business? [4]
- Making membership compulsory will reduce AS risk✓✓ as there will be both good risks as well as bad risks joining the scheme.✓
- Having strict controls on eligibility, e.g. insisting that members need to join within 3 months of starting work.✓✓
- Minimum take-up rates for voluntary schemes.✓✓
- Actively at work clause✓, for example at the date of joining the insurer may require that an employee has been continuously at work for preceding two months. ✓
- Setting FCLs✓✓
- Applying exclusions✓
- Laying down take-over terms where the insurer accepts a scheme that was previously insured elsewhere.✓✓
- Benefits must be determined by a fixed formula, usually related to scheme salary, or be the same for all the members.✓✓✓
- Prudent margins in pricing and reserving basis.✓
A long-term health insurer sells both group and individual health insurance contracts.
Describe the advantages and disadvantages to an individual of joining a group insurance scheme rather than buying an individual policy. [3.5]
Advantages
* Less strict UW so more likely to obtain cover at standard rates✓✓
* Premiums will usually be lower than those for similar individual cover✓✓
* Prems often paid by the e’r, although ee’s may be taxed as if the prem was part of their income (so the cover is not totally “free”) ✓✓✓
Disadvantages
* Benefits will usually be limited and may be determined by a fixed formula, so it is difficult to match the cover to indiv ✓✓
* Cover only continues while the indiv is a member of the group ✓✓, eg if the indiv looses their job, he/she will need to purchase their own cover. ✓
* Cover may be restricted to the individual only✓✓ (e.g. no joint cover)✓
What is an Affinity group? [1.75]
Group of people who share a common interest, background or goal ✓✓ and are linked together by being members of the same organisation.✓✓
Examples: members of a church, sports club, motor organisation, etc. ✓
But not common employment✓✓.
*Tip: Acronym: BIG”
