We tend to meet clients at 2 points:
- A new client that wants something with the best opportunity for rate stability so they can prepare reasonable budgets, or
- When they are tired of the renewal roller coaster, and want the best opportunity for stable rates
It is almost always the same initial story:
- Client wants affordable coverage with rates they can reasonably budget for going forward
- Client is provided with traditional, experience-rated quotes with heavily discounted 1st year rates
- Client chooses the highest coverage at lowest cost believing this is the “best” plan
- An unrealistic expectation is created of what this level of benefits should actually cost
The renewal surprise:
- Clients believe the chosen plan is insurance and are surprised to find out claims have a direct effect on premiums
- The client can now be in an especially tough budget situation at the next 2 renewals when significant rate adjustments are implemented in order to bring rates in line with where they should have originally been
- The financial decision makers push back on the requested benefits cost increase
- The client “goes to market” trying to recreate the rates they were originally sold, recreating the original problem
- Due to budget limitations, the client is usually forced to accept a combination of reduced coverage and higher rates
There are 2 main approaches to Group Benefits:
- Appropriate for clients that prefer a plan where rates are based on their own claims experience.
- Initial pricing is very important as artificially low, initial premium can lead to abnormal increases the following year at which time the insurer will need to bring the premiums into line with actual costs.
- We use a “true insurance” approach towards benefits with a spread of risk across many clients, effectively transferring risk to the pool in order to provide affordable, predictable pricing for all employers, delivering what clients expect a benefits plan should be.
What’s the Conclusion?
There is no one “right approach” to benefits which is why we provide both Pooled and Experience-Rated plans.
Our pooled program provides the best opportunity or stable, predictable rates.
Experience-rated plans require proper funding (no discounting) if there is to be any opportunity for a sustainably affordable Group Benefits plan.
I encourage you to take a look at the Plan Finder Tool on our home page as it asks many of the questions to help narrow-down the right approach for their needs.