Chapter 11

Question 1

a group insurance plan that insures a number of people such as a group of employees, under a single insurance contract, is called a

Answer 1

master group insurance contract

Question 2

what term is typically used to represent the owner of a group insurance contract?

Answer 2

policyholder

• because the holder does not have the same ownership rights as a policyowner of individual insurance.
• rights are granted to insured group members

Question 3

what is the term given to the individuals coered by a group insurance policy?

Answer 3

group insured. or grouped life insured (canada)

Question 4

what do you call a person who is insured under a group health insurance policy in Canada

Answer 4

group person insured.

Question 5

name some responsibilities of a group policy holder

Answer 5

1. enrolling new group members

2. making premium payments

Question 6

what kind of plan is it when a the insured group members are not required to pay any part of the insurance group premium?

Answer 6

noncontributory plan

Question 7

what kind of plan is it when an insured group member must pay part or all of the premium for their coverage

Answer 7

contributory plan

- usually requires covered employees to pay their portions of the premium through payroll deductions

Question 8

what 4 characteristics must by held by the group policyholder and the insurer to form a valid group insurance contract? [rules of contract law]

Answer 8

1. mutually agree to the contracts terms
2. both have contractual capacity
3. exchange legally adequate consideration
4. form the contract for lawful purposes.

Question 9

how is the formation of the contract for lawful purposes structured differently for group over individual insurance?

Answer 9

1. group insurance contract dos not induce wagering over a life (individual require that the insured is of insurable interrest to applicant)
2. this is met for group because policyholder enters into the contract to provide a benefit to covered group members.

Question 10

the group insureds are not parties to a master group insurance contract, therefor they do not recieve what (contract wise)

Answer 10

1. they do not participate in the formation of contract
2. dont receive opies of contract
3. are provided with written descriptions of group plan

Question 11

a certificate of insurance is the written description handed to members of the group plan. What does it describe?

Answer 11

1. the coverage that the contract provides

2. the rights they have under the contract

Question 12

what is a typical term given to an insured group member (referred to as…)

Answer 12

certificate holder.

Question 13

Many group insurance policies impose requirements, such as classes (salary, occupation, length of employment) and eligibility provisions. Name (dont define) the two most common eligibility provisions?

Answer 13

1. actively-at-work provision

2. probationary period

Question 14

deifne the actively-at work provision

Answer 14

states, that to be covered, you must be an employee actively at work- rather than ill or on leave, when the coverage is to take effect.

Question 15

define the probationary period

Answer 15

the length of time- before a new group member can become eligible to enroll in the group insurance plan.

Question 16

what is the eligibility period? (AKA enrollment period)

Answer 16

specified period of time, during which a new group member may first enroll for group insurance coverage.
- coverage under a contributory group insurance plan will not become effective until the employee completes such an auth.

Question 17

what happens is an employee declines group insurance under contributory plans or who drops out of the plan, and wants to join the plan again in the future?

Answer 17

must submit satisfactory evidence of insurability.

Question 18

some contributory group insurance plans feature open enrollment period. What is this?

Answer 18

a period of time, during which eligible people who did not joint the group insurance plan at the first opportunity subsequently may join the plan without providing evidence.

Question 19

who are the typical beneficiaries of any dependent group life coverage?

Answer 19

either the insured group member himself, or a beneficiary selected by the insured group member.

Question 20

If dependent coverage is optional, dose the insured group members (not their dependents) have the right to elect or reject coverage?

Answer 20

yes

Question 21

during the underwriting process of group coverage, who is being assessed?

Answer 21

the group, and usually does not require each proposed group insured to provide individual evidence of insurability.
- each insurance company establishes its own u/w g/l to define types of groups it insures.

Question 22

in general, group insurance underwriting has what 4 objectives?

Answer 22

1. determine whether the proposed group is an acceptable risk
2. prevent anti-selection
3. keep admin cost as low as possible
4. determine appropriate premium rates to charge group insurance.

Question 23

in general, groups that are eligible for coverage can be placed into one of 6 different subcategories. Name the 6 categories of group insurance.

Answer 23

1. single-employer group
2. labor union group
3. multple-employer group
4. association group (think alumni of college)
5. debtor-creditor group
6. credit union group
7. discretionary group

Question 24

does insurance companies often impose more stringent underwriting requirements on association groups or employer-employee groups?

Answer 24

association.

Question 25

name 4 types of association groups, and define them.

Answer 25

1. trade- firms that operate in a specific industry
2. professional- individuals who share an occupation
3. public employee- individuals employed by a governmental entity
4. common interrest- individuals who share a common bond, back group or interest. (retired person)

Question 26

how do insurance companies establish the size of the group for group insurance.

Answer 26

the more the better, since the lost rate will reflect the predicted amount with more of a sample size.
- usually there a minimum group size requirements.

Question 27

what do underwriters have to consider when underwriting group insurance (to maintain long contracts)

Answer 27

1. size of group
2. flow of new members into group
3. stability of group
4. participation levels
5. determination of benefit levels

Question 28

what is the benefit schedule?

Answer 28

defines the amount of life insurance the policy provides for each insured. th8is includes benefit amounts in the master group contract which prevents insureds from selecting their own coverage amounts to prevent anti-selection

Question 29

some group insurance polciies allow covered group members to purchase additional coverages from a schedule of optional coverages. To avoid antiselection, the group insurer may do what?

Answer 29

1/ limit the optional co coverages that the group plan can offer.
2. require the insured group member to provide satisfactory evidence of insurability if the optional coverage selected exceeds a certain amount.

Question 30

when establishing premium rates for specific group insurance policies, what is taken into consideration (what cost will it incure?)

Answer 30

2. to provide the benefit promised by the group insurance policy
3. administrating costs

Question 31

true or false. The premium rate for a group insurance policy is recalculated every year that the policy remains in force?

Answer 31

yes

the insurer generally guarantees the group premium rate for one year, some will guarantee for longer.

Question 32

Name the three different methods used to calculate the premium rate to charge for a group coverage.

Answer 32

1. manual rating- based on the experinece of a broad class of group rather than on a partical group’sclaims and expense experience. (think first time purchase)
2. experience rating- method of setting rates that consider the particular groups’ prior claims and expense experience. (think renewal/ large group)
3. blended rating- based on a combination of manual and experience rating. (think really small groups)

Question 33

what is the payment frequency typical for group insurance premiums?

Answer 33

monthly
-note premium rate for a group insurance policy is guaranteed for one year, the premium amount payable each month varies, depending on the amount of insurance in force that month.

Question 34

how is the premium refunds calculated? (they are often called dividends and work must like regular dividends)

Answer 34

by evaluating the groups claims expense experience druing the policy year, if there were fewer claims, or there were lower admin exceeds, then anticipated the the insurer may refund a portion of the premium paid for coverage.

Question 35

Who recieves the premium refunds?

Answer 35

policyholder, even if the plan is contributory.
- if the refund to the policy holder of a contributory plan is greater than the portion of the group premium that was paid out of the policyholders funds, then excess amount is used for the benefit of the individual participant.

Question 36

how can a group policyholder reduce an insurer’s admin expenses, and reduce their premium rates?

Answer 36

by preforming the admin work themselves.

- recordkeeping. (contact info of insurers, beneficiary info)

Question 37

what is a self-administered group plan?

Answer 37

a group insurance plan for which the group policy holder is responsible for handling the administrative and recordkeeping aspects of the plan.

Question 38

what is an insurer-administered group plan?

Answer 38

a group insurance plan for which the insurer is responsible for handling the administrative and recordkeeping aspects of the plan.