Is it time to renew your insurance contract?
In the world of group insurance benefits, stakeholders work with their brokers to provide the best solutions to their employees. The industry itself is undergoing major changes and aiming to be more transparent with their clients about their contracts.
Stakeholders are often in the dark about important details in their contract. It is a broker’s responsibility to guide them and make sure they understand their plans.
Here are some signs your contract might not be optimal.Are your administration fees competitive?
Normally your administration fees include the following:
- general admin expenses,
- claims handling fees,
- broker commissions,
- premium tax.
With the exception of premium tax, all other expenses can vary from one contract to the other. Normally stakeholders will receive annual renewal reports, for example: health care and dental care section of these reports- the insurance company will identify these as their target loss ratios (TLR). For example, if they identify the TLR at 70%, then the admin fees are 30%. Your annualised premiums will help you gage where your admin fees should situate themselves. It is also important that stakeholders receive a copy of the insurance company’s annual renewal report in order to validate the above.
Mutualisation thresholds : The Quebec Drug Insurance Protection Corporation (QDIPC) sets thresholds (deductibles) that need to be integrated into the stakeholders contracts, based on number of employees. It is important for stakeholders to understand exactly how these deductibles affect them in the event of a high claimant. The threshold may be too high in relation to the annualized health care premium. *This is only applicable to prescription drugs.
Does your broker bring forward other financial models? The most popular agreements are non-participative agreements (‘insured’ contracts), where the insurer assumes all responsibility of loss or profits. However, other options exist, such as Administrative services only (ASO) currently gaining popularity. This option is more transparent and the fees are generally lower. This type of agreement will generally lead to more stability in terms of annual rate adjustments, however these type of contracts can also lead to stakeholders covering a deficit or receiving a refund from the insurance company.
Is your broker really protecting your best interests? If you doubt or question your current contract, you may need a second opinion, just to err on the side of caution.