A matter of transparency.

 

In a world where group insurance costs are constantly rising, thanks especially to the exploding cost of medications, higher incidence of disability, and significant government retrenchment, it is crucial to control all the factors that affect group insurance premiums.
 
Employers need to be aware of all the fees associated with their group insurance. The benefits consultant has a duty to achieve the most economical cost structure possible. Costs vary enormously from one group to another; they are affected by factors such as group size, consultant’s commission and the complexity of the group’s administrative structure (number of divisions), to name a few.
 
At renewal time, the insurer will analyse your experience rating – net premiums vs. benefits paid – in order to determine whether your premiums should rise. Higher administration costs have a negative impact on the experience rating, because the insurer deducts these costs from your premiums paid. Thus an excessively costly administrative structure leads to premium increased and, over time, creates a significant gap between what you are actually paying and what you should be paying. That should make it obvious why you need to know exactly what your administrative costs are, and understand how they affect the competitiveness of different insurance offerings.
 
In addition to administrative costs, it is essential to be aware of the group’s insurance claim habits, because this makes it possible to have a real influence on claim trends. For example, if claims increase substantially one year because an employee received a very costly treatment, and the treatment is now complete, you should not be fully penalized for the large claim. The key concept here is the recurring claim. The consultant’s role is to ensure that the insurer does not give too much weight to a single event that had a major impact on your experience, but that will not necessarily recur in the future.
 
Of course, this brief article only outlines a small portion of the things a benefits consultant needs to manage. The goal is simply to make you aware of how important it is to fully understand why your premiums change when it comes time to renew your policy.
 

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