Group Life Insurance Flashcards
What employee subgroups tend to benefit from the limited underwriting in a group setting?
Those with risk factors related to health, occupation, or hobbies that make them expensive to insure, or make them uninsurable. In such instances, group coverage may be the only way they can obtain coverage at reasonable cost.
How is underwriting for group life different than for private life?
Ther Group insurance rates are set based on averages for the company’s eligible employee base. (Research further)
What are the key principles of group underwriting
Topic: Group Underwriting
Barron’s Insurance Dictionary
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Process of forming a large group of homogeneous lives that in order to allow the law of large numbers to oper- ate, thereby projecting a probable rate of mortality or morbidity whose creditability approaches one, and standard deviation approaches zero.
Since no evidence of insurability has to be submitted on an individual basis, the objective of this type of underwriting is to minimize adverse selection by any member of that group. In an effort to achieve this minimization, certain underwriting rules apply: (1) the group must be formed for reasons other than obtaining insurance, or people who have a particular disease would join together for the sole purpose of buying insurance; (2) a constant flow of young people into the group and outflow of older people out of the group is required so that, statistically, the average person (standard health) will continue to be insured; (3) the insurance benefits should automatically be determined by some type of formula on behalf of the members, or only those members who are in poor health would select the higher limits of coverage; and (4) close to total participation of all eligible employees should be achieved.
