3502(drennan) topic 4

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  1. definition of group insurance
  2. Arrangement for insuring a group of persons
    • • Under a single contract
    • • Provides insurance coverage to individuals who have a specific
    • relationship to the policyholder
  3. who is policyholder of a group insurance contract?
    the er
  4. insured persons under a gi contract are or could be:
    • Employees of the Employer
    • Dependents of the Employees
    • Former Employees
  5. In go, where is the money held?
    in a collectively bargained multiemployer or single employer trust
  6. insured person under a trust fund gi contract would be:
    • Members of the union
    • Dependents of the members
    • Former members
  7. what are the two decisions in gi underwriting?
    • insure or not?
    • how much to charge
  8. what is the unit of observation for underwriting purposes in group insurance?
    the group as a whole, not any particular individual.
  9. Broad-­‐ based characteristics of the group are used in the underwriting process or
    decision including:
  10. Industry/Occupation
    • Age distribution
    • Gender mix
    • Location
    • Claims Experience in the past
    • Group size + number of dependents
  11. Purpose of underwriting
    An insurer offers insurance in the marketplace for a stated premium
  12. adverse selection exists when:
    • Only high risks buy or buy in a higher proportion than the low risks AND not being charged “high risk premiums”
    • Insurer either does not have the correct information to classify the risks or cannot use observable information
    • Arises from asymmetric information
  13. best solution to a.s.
    individual underwriting
  14. acceptable groups in group insurance
    • Employer-­‐Employee group
    • Taft-­‐Hartley Plan (collectively bargained trust)
    • Professional Associations
    • Student Groups
    • Alumni Associations
    • Veterans
  15. reason for existence in the group for gi purposes should be
    • Should exist for reasons other than obtaining “underwriting-­‐free” insurance
    • Purchase of insurance should be “incidental” to the group
    • o “True Group”
    • o Not a “fictitious group”
    • Prevents Adverse Selection
  16. closed group
    not ideal because the average mortality and morbidity rate increases every year making it unstable
  17. how does a group remain stable?
    steady flow of persons in and out of the group
  18. if an er has a relatively closed group:
    • overtime, costs increase
    • o If plan is contributory, contribution increases
    • o Good risk may drop out
    • o Adverse Selection death spiral
  19. why is persistency of a group important?
    • Long term relationships
    • Desirable for the Employer to remain with the insurer for a number of years
    • o Initial acquisition expenses are amortized over time
    • o Insurer gains information about the group overtime
    • Controls Adverse Selection
  20. ideally, determination of benefits in gi should____
    • there should be little choice
    • this creates lower admin costs and controls adverse selection
  21. determination of eligibility(definition)
    An Employee or individual must satisfy All eligibility standards before moving to participation in a given benefit
  22. how does limiting benefits to only fte's control a.s
    there is a high turnover rate among part time ee's
  23. probationary period
    Minimum period of time a newly hired  employee must wait before becoming eligible to participate
  24. pro's of probationary periods
    • Controls admin costs
    • o Turnover is higher among newly-­‐hired Employees
    • o Controls Adverse Selection
    • o Rewards longer service Employee’s
  25. what types of insurance typically have shorter waiting periods?
    Health, life, disability “protection/needs”, oriented benefits
  26. what types of insurance typically have longer waiting periods?
    • Retirement Plans
    • Capital accumulation benefits
  27. ways gi plans control a.s.(5)
    • employment status restrictions
    • probationary periods
    • actively at work requirement
    • pre-existing conditions
    • enrollment periods
  28. pre existing condition
    a condition that existed prior to being covered by Insurer B and that is involved in an on-­‐going claim
  29. two permissible enrollment periods
    • open enrollment
    • new hires
  30. insurers specify a minimum participation percentage of around____ for contributory benefits
  31. is a low participation rate possible evidence of a.s.
    yeah, in favor of hce's
  32. why might participation percentage be too low?
    • Contribution is too high 
    • Adverse Selection Problem
    • Not a good or desirable benefit 
    • Communication is not good
    • Possibility of duplicate coverage or a subsidy # of partcipants
    • # of eligible person-­‐those covered elsewhere
    • Too many options for a particular benefit
  33. is there an a.s problem in a non contributory benefit?
  34. are there a.s. problems in voluntary benefits?
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3502(drennan) topic 4
2014-10-20 01:24:13
rmi 3502

rmi 3502 topic 4 cards
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