Chapter 4: Group products Flashcards
List the main purposesofgroup products
may be alegal requirement
can promote apositive message to employees at time of recruitment/ promotion
can promote health and thus increase employee satisfaction/ retention
canpromote healthandensure a speedy return to work (productivity) - group PMI
may be tax advantageous for insurer to do so
may havetax advantages over individual products - attractive to employee
Describeflexible benefit schemes
Employee chooses benefits from a range of benefits offeredby the employer,some of which may require a employee contribution
It gives employeesgreater flexibility to match benefits to needs
However, thismay present problems of adverse selectionandincreased administration
Discuss thefree cover limit
Free cover limit is the benefit level below which the policyholder will not be subject to individual underwriting, in a group setting
Individual underwriting may still apply for those seeking benefits above the free cover limit
free cover limit is normally a function of number of members in the group
The aim of free cover is to reduce the cost of underwriting and allow a faster application process
List themain factorsused to determine thefree cover limit for a typical group CI scheme
whethermembership is compulsory or voluntary
if voluntary, thetake-up rate
pros and cons with reduced underwriting from a higher free cover limit
level of benefits relative to competitor/ salary
free cover limit relative to competitor
industry of employer
size of the scheme:
in a large scheme, impact of a few number of claims with relatively high benefit levels has less of an impact than in a small scheme
in a large scheme, the decision to take out group insurance is less likely to be a form of anti-selection
Discuss the likely relationship between brokers and the employer
Employers usually obtain their group insurance policies from brokers
The broker will be responsible for most of the communication and data gathering
limited opportunities for insurer to:
build client relationship with employer
influence retention of the business
influence risk attitude and risk management of employer
