Group risk markets have a bright future, but, says Lee Watson, risks of getting quotes and applications wrong are increasing.
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Adopting a standardised quotation request format and XML approach will have the following benefits:
• Mitigate competency based errors and omissions.
• Help ensure employees are covered for their maximum level of benefit, and if that’s not possible, proactively communicate the shortfall and any remedial action.
• Maintain a system which helps manage and distribute material information which is required by the client, employee and insurer.
• Ensure there will be no ambiguity enabling insurers to forward an accurate quote first time.
• Enable intermediaries to negotiate the most competitive premium possible for the client.
• Avoid dual pricing, which could lead to uncomfortable conversations with the client where a competitor has been involved and undertaken more thorough research.
• Help maintain consultancy and administrator competency.
Developing opportunities
From the insurer’s perspective, a standardised approach will enable them to focus on developing relationships and business opportunities as opposed to being drawn into reconciling problems which would typically lead to relationship deterioration and a difficult conversation with clients.
Standardisation will improve competency, allowing for a greater focus on the following areas – which are typically overlooked:
• Accurate cost of insurance
A client’s claim mitigation is rarely disclosed to the insurer which means the premium will typically be conservative. An intermediary’s position may be compromised if a competitor establishes claim mitigation with a client and the incumbent intermediary didn’t. The incumbent will probably have to rely on the strength of their relationship to recover the situation but is unlikely to receive another chance.
• Age discrimination
Group risk is exempt from age discrimination but employers are not. How this is broached by employers will ensure that the entry and termination age is set accurately. In most cases, there will not be a contractual retirement age and employers will need to determine a scheme termination age which best fits its workforce. Leaving this decision too late will certainly lead to discrimination and a worst-case scenario of no cover.
• Disclosure of material facts
Historical sums assured and claims information is vital to assess past activity. While this isn’t the deciding factor, it certainly influences the cost of insurance or even the insurers’ willingness to insure.
Medical underwriting also needs to be fully and accurately disclosed to the insurer irrespective of the employees desire to complete.
Temporary cover doesn’t mean the employee is covered for the maximum level of benefit while medical underwriting is being completed.
This is typically a finite period of 120 days and starts from first eligibility or a salary rise which increases the employee’s level of benefit. Temporary cover doesn’t include pre-existing conditions, and communication with the employee is vital to ensure the terms of cover are understood and accepted.
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