Chapter 4 - Health and care insurance (Group products) Flashcards
Term of Group products
Short-term. Typically 1 - 2 years.
Who is the policyholder in group products?
Employer
Why is there group insurance?
- It is a legal requirement
- attract employees, retain employees
- Tax advantages
Flexible benefits and downsides to the insurer
- Gives employees greater flexibility to match benefits to needs
- Present Anti-selection problems to the insurer, increased administration, and difficulties in determining basic risk costs
Underwriting and acceptance of group products
- It is usually designed such that enrolment is open to all members of the group at least for basic products
- Underwriting may apply for additional cover
Anti-selection in voluntary group products
- The insurer will look for minimum take-up rates in order to limit anti-selection
- The more tightly defined the eligibility for membership and the closer to compulsion the participation, the more relaxed the insurer can be towards underwriting and pricing
How do insurers deal with anti-selection
- Having strict control on eligibility (e.g insisting that members need to join the scheme within three months of starting work will reduce the risk of selecting against the insurer)
Advantages of reduced anti-selection
- Reduces the need for underwriting, and the need for margins in the pricing basis
What is free cover and what is its aim and how must the benefits be applied so that free cover is appropriate
- It is where certain level of benefits is available to all members of a group without individual underwriting
- Only those seeking benefits above the limit need to provide medical information or undergo tests
- The aim is to reduce the cost of underwriting to the insurer and to avoid inconveniencing the client by asking too many people to be medically examined
- Underwriting would still be required for large cases
- Free cover can only really be applied where members of the scheme can have different levels of benefits. so that some members (those above the free cover limit) will be underwritten and others not
What is the ‘actively at work’ requirement
The idea is that employers will employ healthy people so that the required medical screening is achieved through the employer’s recruitment process rather than explicitly by the insurer’s underwriting
What are Group PMI benefits
- Benefits and exclusions are generally similar between the group and individual products, although pre-existing conditions are more likely to be covered under group business due to a lower degree of anti-selection likely to be encountered
What are the key requirements to establish a group scheme
- there is a definition of who is eligible for benefits under the scheme
- the benefits under a scheme are clearly defined by:
– Size
– definition of a claim
– by the period of benefit
What are the purposes of group CI insurance
- It is seen as a valuable benefit by staff and can be used by an employer as part of the overall benefits package to attract and retain staff
What are some of the restrictions involved in good scheme design to prevent anti-selection
STEAL
- SETTING free cover limits
- setting TAKE-up rates on voluntary schemes
- ENSURING members are actively at work when cover begins
- APPLYING exclusions
- LAYING down take-over terms where the insurer accepts a scheme that was previously insured elsewhere
How can group products arise
- The employer pays the whole premium on behalf of the employees
- The cost is shared between the two parties (Employer pays for part or all cost, employee pays for for cost for spouse and children)
- Where the employer facilitates with payroll deduction but the employee pays all costs
- Where the ‘group’ is not employment based but (for example) linked to club memberships or credit cards
