With decades of group benefits experience, relationships across the sector, and as the leader of one of Canada’s most innovative group benefits risk teams, GroupHEALTH Senior Vice-President of Underwriting Gary Walters knows how to build benefit plans for the future (even the post-pandemic future).
We sat down with him to get his thoughts on where benefits plans are going. Today’s conversation is about how underwriting for clients is done at GroupHEALTH.
What role does underwriting play in providing our clients a benefits plan?
Our job is to work with the potential client to understand their particular circumstances, the nature of their business, the nature of their employees and their goals. We then do analysis to determine the appropriate price (“premium”) to cover those risks. I especially enjoy finding new solutions for our clients, like working with businesses to restructure their plan to gain ongoing savings.
At a technical level we review our clients’ plans annually to see what their claims have been and determine the cost of the premiums going forward. We do more than number-crunch: we actively provide advice to find more value for businesses, and better coverage for employees.
What does GroupHEALTH’s underwriting prioritize when working on a client’s employee benefits plan?
There are three key factors that influence our underwriting process: plan demographics, plan design and past experience. We look at all of them to come up with the right risk assessment, and thus the appropriate price.
More information not only speeds up this process, but gives us greater accuracy. For example, understanding a company’s past claims experience is the best indicator of that company’s future experience. Sometimes we can infer claims experience from prior rates a company may have paid, and sometimes we may have to use standard rates applied to companies in the same sector and location.
What are the most popular underwriting methods used for employee health benefits for small businesses?
There are a number of different underwriting methods for small businesses. The one we choose really depends on the information we have. If a small business has never had an employee benefits plan before, we use “standard rates” based on the type of business and where it’s located.
If a small business has had an employee benefits plan before, we may use their past claims experience, although this isn’t always the best indicator of future claims for very small businesses.
The key is reliable information about what the business does, where they’re located, and the composition of their employee base. Because GroupHEALTH works with a lot of small businesses, we believe we’re particularly skilled at determining a fair price for their benefits plans.
Benefits pooling could be a great option for small businesses. Many company’s claims are likely to have some volatility. For example, if you have a few employees, one large claim can significantly impact the total number of claims on the plan, and this could increase the plan’s cost. Pooling helps us average things out to protect the company from the volatility of the claims: it increases predictability and reduces swings. In the end, this creates greater cost certainty for small businesses.