Group Ins. Chpt32 life Claim Cost

Question 1

Describe manual premium tables and manual claim table

Answer 1

1. Manual premium tables
   
   1. 1 rates included average expenses and profit
   2. 2 fully pooled: adjusted manual rate for size, margin, risk, profit, and expense if different than standard
   3. 3 large groups: combined manual rate and group’s own experience
2. Manual claim tables
   
   2. 1 fully-pooled: calc manual claim rate, add expense, risk and profit, margin
   3. 2 larger groups, combination of manual claim rate and group’s experience
   4. 3 Manual claim tables show expected monthly claim for each age and sex

Question 2

Developing a manual claim table

Part 1 of 2

Answer 2

1. Problem is finding appropriate group experience
   
   1. 1 use SOA studies, own experience, population statistics
   2. 2 Limits: treatment of DI and acc death, combined Male and female
2. Company experience
   
   2. 1 Best source of mortality, reflect carriers u/w and marketing
   3. 2 Published table can be basis for graduation
   4. 3 Carriers vs intercompany experience for assessing business
3. Changes in mortality
   
   3. 1 Analyze changes in population mortality or own experience
   4. 2 2006 Study: improvement over 1% per year
   5. 3 increase longevity may replace death claims with disability
4. Reinsurance
   
   4. 1 carrier limit coverage they retain on any one individual, rest covered by catastrophic reinsurance
   5. 2 net cost of reinsurance factored into claim table or expense charges
5. Conversions to individual life policies
   
   5. 1 DI or ADD are generally not covered under converted policy, allow conversion of reduction due to retirement or age, or pay commissions on converted policies
   6. 2 subject to severe anti selection, excess cost needs to be recovers from group policies
   7. 3 manual claims table adjusted to include excess cost of conversion
   8. 4 some offer portability along with conversion option

Question 3

Groups covered

Answer 3

1. Employees of a single employer
2. Multiple-employer trusts
3. Negotiated welfare funds
4. Union groups
5. Fraternal associations

Question 4

Developing a Manual claim table

Part 2 of 2

Answer 4

1. National Studies
   
   1. 1 2006 SOA study
      
      1. 1.1 excluded grp UL, conversions, portability, dependent, mass-marketed, standalone ADD, reins assumed
      2. 1.2 results for two types of disability
      3. 1.3 waiver incidence rates
   2. 2 Canadian institute of actuaries studies
      
      1. 2.1 Experience on number of lives and amounts of insurance
   3. 3 use of actual to expected or tabular ratios
      
      1. 3.1 expected claims may not reflect all variables
2. Population statistics
   
   2. 1 mortality in general population higher than group plan, reason:
   3. 1.1 flow of healthy into group, aged and impaired drop out
   4. 1.2 employees pass physical exam at many companies
   5. 1.3 actively-at-work and waiting period are required
   6. 1.4 individual medical underwriting required for certain risks
   7. 2 useful for estimating improvements in mortality, ratios between sexes and ages, rates for dependents and retirees

Question 5

Manual claim table adjustments

Answer 5

1. Disability factors
2. Effective date adjustment
3. Industry factors
4. Regional factors
5. Lifestyle factors
6. Marketing: captive agencies have more favorable results
7. Contributions: if 100% ER paid, anti selection minimized
8. Case size factors and volume adjustment
9. Plan options: usually completely paid for by EE
   
   9. 1 imperative that age-rated approach be used

Question 6

Group Life: Group risk selection considerations

Answer 6

1. Insurance should be incidental to group’s existence
2. Selection control: eligibility, Ben design, rate structure, min participation
3. Plans provide flat amount, multiple of earnings, schedule of amounts
4. Require EE be actively at work on date effective
5. New EEs not eligible until complete a waiting period
6. For medium and large group offered without evidence of insurability
7. Indiv u/w for high amounts, late entrants, small group