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LOMA 301 I*STAR > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

Insurers that offer group life insurance products market those products thorough group representatives. Who are these people.?

A

Salaried insurance company employees specifically trained in the techniques of marketing and servicing group products.

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2
Q

The group UW process varies, and depends on the what the groups are looking for. What do UW ask the groups applying for insurance?

A
  1. Is this their first time?
  2. replacing existing coverage?
  3. changing or adding coverage (with same insurer)
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3
Q

When groups are buying insurance for their first time or are replacing their existing coverage, they follow 4 primary steps. what are they?

A
  1. requesting coverage: group soonser works with group rep to create and distribute an RFP
  2. submitting a proposal for insurance.
  3. developing a master application
  4. delivering a master group insurance contract
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4
Q

What is another name of a group sponsor

A

Group prospect

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5
Q

What is an RFP?

A

request for proposal
- a document that provides details about the requested coverage and requests a bid from one or more insurers for providing that coverage.

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6
Q

What is a proposal for isnuracne

A

a document that details the specific provisions of the group insurance plan propsosed by an insurer for a group prospect.

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7
Q

What is a master application?

A

An application for group insurance that contains the specific provisions

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8
Q

What is a master group insurance contract

A

legal document that certifies the relationship between an insuere and a groiup policyholder and spcifies the benefits provided by the cotnract to the insured group members.

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9
Q

All RFPs provifde basic information about the applicant and the group prospects. What oinformation is provided on this RFP
?

A
  1. name and address
  2. size,
  3. previous insurance hx
  4. current benefit program
  5. requiremetn for participation in the group plan
    - - The RFP also indluces questions about a potential insurance providers
  6. qulifications: yrs in business, work load, turnover rate
  7. service options: materials, payroll deductions, customized communications?
  8. fees and chartgres.
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10
Q

Most RFPs for group insurance coverage includes a benefit transmittal. whjat is this?

A

provides details about the insurance benefits being requested, the effective date of coverage, how premiums billing and claims will be administrated, etdc

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11
Q

What is a contibutory plan and a noncontributory plan?

A
  1. group insurnace plan where insured group memebers must pay part or all of the premium for their coverage. They can chose to participate.
  2. hotup insurance where insureds are not required to pay premiums (paid by policyholder) and all eligible gorup memebers are provided with coverage automatically.
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12
Q

A common attachement to the RFP is a census. What is this?

A

document that list demographic information about the group prospects as a unit and about individual memebers in the group such as

  1. totoal number of people in group
  2. total number of memebers eligible for each type of coverage requested
  3. DOB, Sex, dalary and job classigfication of each eligible memeber
  4. dependents covered under the plan
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13
Q

What is a dependent under the purpose of establishing eligibilityt for froup insurance coverage?

A
  1. spouse
  2. unmarried child under a specific age limit
  3. disabled child of any age to relies on the group memeber for financial support
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14
Q

RFP for a plan that has disability ebenfits also includes a list of open claimants- what is this?

A

people who are group insureds currently receiving short or long-term disability income benefits.
+ their basic information such as DOB, date of disabiulit, expectation of duration of disability, and benefit amount.

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15
Q

What is a sales intermediary letter?

A

the financial professional or group representative working wiht a group prospect submits a letter that includes observations of recommendation sabout the appropriateness of the requested coverage.

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16
Q

What is the Employee retirement income security act?

ERISA

A

US federal law designed to protect covered employees by ensuring that employee benefit plans meet specific requirments related to plan creation and maintenece.
- requires sponser of most employee benfit plans to file an annual report with the fed gov.

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17
Q

What is a self-insured group plan?

A

plan for which the group sponsor- usually an employer- takes complete responsibility for paying all claims and related expenses.

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18
Q

As an alternative to self-insuring group plans, some group sponsers enter into an administrative service only arrangement with an outside vendor (ASO arrnagement). What is this?>

A

the group sponsor funds its own employee benefit plan but hires an outside provider to preform specific admin services.

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19
Q

What are fully insured group plans?

A

group insurance plan under which the insurer is financially responsible for all incurred claims.

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20
Q

proposals submitted in response to an RFP for insurance include 4 key elements. What are they?

A
  1. description of UW principles and assumptions used to determine coverage
  2. benefit schedule- details of coverage provided for each glass of group incureds
  3. list of premium rates for each group
  4. details of plan admin, and responsibilities of the group policy holders and insurer.
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21
Q

What information does the master application provide the UW?

A
  1. group prospects: name, organization and nature of biz
  2. number of group memenbers, dependents
  3. definition of the probabtion period
  4. schedule of beenfits
  5. percent of premiums the group policyholder will pay for requested coverage
  6. adminstrator details,
  7. specific provisions of the plan of insurance.
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22
Q

define probation period

A

lenght of time typically from one to six months that a new group memeber must wait before being eligible to enroll in a group insurance plan

23
Q

What is a plan administrator under the ERISA definition

A

the individual or organization responsible for handling the admin aspects of a retirement plan or other employee benefit plan and ensuring that the plan complies with applicable regulatory requirments.
- could be HR

24
Q

The group policy holder and the insurer are parties ot the contract. group memebers enrolled in the plan are not, they instead get enrollement cards. define this

A

cards that provide personal data about participants in the plan and provide evidence that those participants acknowledge and accept the terms of their coverage udner the plan and agree to pay their portion of the premiums.

25
Q

Typically UW dont consider insurability of individual memebers in a group plan. What are 3 factors that lead to an UW assessing indiviudal applicants?

A
  1. SMALL GROUPS
  2. GROUP MEMEBERS ENROLLING AFTER THE ENROLLMENT DEADLINE
  3. excess coverage is requested.
26
Q

In the risk assessment of group insurance, what are some characteristics of the group prospect that help uw distinguish good and poor prospects

A
  1. reason for existance - did the group form just for insurance?
  2. type of group
  3. size
  4. nature of bizz - financial stability
  5. geo location - assoc. mortALITY / laws
  6. age distribution
  7. turnover of group memebership
  8. participation in the plan
  9. classess
  10. expected persistency
  11. prior coverage and claims experience.
27
Q

In the risk assessment of group insurance, what are some characteristics of the proposed coverage

A
  1. plan insurance

2. plan administration

28
Q

There are 4 broad categories for “types” of eligible groups. Name them

A
  1. single-employer groups- one employer and employees. Most pop
  2. multiple-employer groups-
  3. association groups
  4. debtors-creditor groups- (banks, unins, cc comapnies and debtors)
29
Q

multiple-employer groups consist of employees who…

A
  1. two or more employers in the same industry
  2. two or more labour unions
  3. one of more employers and one or more unions.
    eg: trade associates, and MEWAs
30
Q

what is multiple-employer welfare arrangements (MEWAs)

A

formed by two or more small employers to provide group insurance benefits to their employees.
- sponsed by an insurer or 3rd party and the policy is issued to the trustees of a trust established for the purpose of purachins the coverage.

31
Q

What are association groups?

A

members of an association, which is an organization of employers or individuals formed for a purpose other than to obtain isnurance.
ex:
professional association group- medicals, engineers
affinity groups; group that shares a common bond/backgraound.interrest and belong to an associated group. college alumni association.

32
Q

In terms of the risk associated to the group size, each insurer will establish its own set of rules and regulations. what would they do?

A
  1. set standard for the size of the group it is willing to ensure
  2. procedures for UW different sizes of groups
33
Q

True or False

UW for smaller groups are more stringent than larger groups?

A

True

34
Q

How do insurers combat over a high turnover rate?

A

extending the probationary period for new employees to keep admin costs down.

35
Q

What is the typicall eligibility ratio and minimum participation requirement from employers>?

A
  1. noncontributory is 100%
  2. contributory plans usually between 75-100%, this number may decrease if the size of the participating eligible employees increases
36
Q

What are some typical non-discriminatory and/or anti-selective classes for group insurance?

A
  1. based on salary
  2. based on rank
  3. based on hours worked
  4. based on length of service
37
Q

Most employer-employee life insurance policies specify that employees are eligble for coverage if they satisfy what requirements?

A
  1. house of service-
  2. eligibility -
  3. work status- actively at work provision
38
Q

in contributory plans, the probation period is usually followed by an eligibility period/ enrollment period. what is this?

A

period of time, usually 31 days, during which eligible group memebers may enroll for the contirbutory insurance coverage without having to provide evidence of insurability.

39
Q

Administration of a group life insurance plan typically involves what duties?

A
  1. promoting the plan to group memebersa and encouraging all eligible memebers to enroll
  2. certifying the eligibility of each group member who will be covererd by the plan
  3. collecting and keeping accurate recods of each group memebers contributions to the plan
  4. maintaining accurate and complete records of costs and claims
  5. recording additions, termiantions, and participant status changes,
  6. assisting with claims submissions
40
Q

Effective plan adminsitrations is critical to controlling plan costs and ensuring the statisfaction of the group policyholder and insured. What usually happens under an

  1. insurer administrated plan
  2. self-administered plan
  3. third-party administrator
A
  1. insurer handles mosr the adminsitrations
  2. group policy holder handles most the administration
  3. organization that is not affiliated with an insurer and that provides various administrative services to insurers and group policyholders.
41
Q

Insurers that offer group insurance establish premium rates on a case-by-case basis and recalculate them yearly to ensure they reflect what?

A
  1. adequate to cover the insurer’s cost of paying claims, administrations, commissions, and other expenses
  2. equitable so that each insured group pays a fair amount to the risk
  3. competitive enough to attract group prospects.
42
Q

When calculating group premiums for large groups, group life insurance underwritiers typically use mannual rating, experiencing rating, or blended rating. What is manual rating?

A

insurer divides group insureds into broad classes based on the company’s own experience and on information collected by various govermental and trade associateions then sets premiums for each class.

43
Q

When calculating group premiums for large groups, group life insurance underwritiers typically use mannual rating, experiencing rating, or blended rating. What is experience rating?

A

insurer consideres the particular groups’ prior claims and expense experience.
- used to calculate initial premium rates for larch groups that have been previously insured and have credible past/ex[pected claims experience and renewal premium rates for currenmtly insured groups with credible experience.

44
Q

What is a group’s expected claim experience?

A

the monetary amount of claims an insurer estimates the proposed gorup will submit during the upcoming year.

45
Q

What are some changing factors that may affect a group’s expected claim experience?

A

number of group insured
group’s average age or predominant sex
groups beenfit schedules
employee mix
job duties employees perform
industry or business segment in which they opreate
exonomic encironement that affects financial streght

46
Q

A group insurance policy may allow an experience refund. What is this?

A

the portion of a group insaurance premium that is returnd to a group policgoilder if the group’s claim experience during the year was more favourable than expected when the premium was calcualted.

47
Q

What happens when a group is too large for manual rating but they do not have claim experience informaiton?

A

The insurer uses blended rating. which is a method where premiums are calculated with both manual rating and experience rating. UW assign a credibility facrot to the group’s experience.

48
Q

What is a credibility factor?

A

percentage that represents the amount of weight given to a group’s actual claim experience for premium rate calciuulations.

49
Q

How do UW typically determine the blended rate>

A
  1. multiplying the premium calculated using experience rating by the credibility factor assigned to the rating
  2. multiplying th premiums calcualted using manual rating by the remainign percentage of the group’s expected future claims
  3. addining the two resulting numbers.
50
Q

When UW the premiums for small groups, UW used to use manual rating. Tupday they can also use poolting to seep rates methods for premium calcualtions. Define these

A
  1. pooling: insurer comabines several small groups into one large group, or pool, then UW the pool as if they were one group.
  2. step rating: insuere’s accumulated claim experience is used to create rate tables that are divided into a series of age-graded and sometimes sex specific steps.
51
Q

When can applicants add new memebers to an already issued policy?

A
  1. new employe after the probation period has 31 days to add themselves and their dependents.
52
Q

What are late enrollees?

A

those who enroll into the plan following the enrollment period. They are required to provide evidence of their insurability before being enrolled.

53
Q

How often do group insurance policies need to be renewed?

A

at the end of each contract term, usually 1-2 years.
usually done with little to no UW, but they can opt for renewal uw where an UW reviews the risk assessment factors considered when the group was originally underwritten and determines whether the characteristics of the group

54
Q

Premiums could increase, and group policyholders may decide not to renew a group policy. There are alternative solutions, what are they?

A
  1. change the benefit design by reducing benefits
  2. require a larger premium contribution from group insureds,
  3. pooling a small groups’ exerience with another gorup creating a more acceptable level of overall risk
  4. investigating the cause of the plan’s poor experince and taking measures to fix it

LOMA 301 I*STAR (12 decks)

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