COMPREHENSIVE EXAM REVIEW
Group Benefits Plan - ANSWER-Any type of plan that provides benefits to plan
members as one group, independent of government-sponsored benefits
Speculative Risk - ANSWER-Assumed as a conscious choice and involves three
possible outcomes: loss, gain or no change
Pure Risk - ANSWER-Related to events outside the risk takers control. The only
possible outcome is loss - Insurance only covers this type of risk
Personal Risk - ANSWER-Arises from the possibilities of death, poor health or outliving
savings
Loss Rate - ANSWER-the number and timing of losses
Contract of Indemnity - ANSWER-The amount payable is based on the actual amount of
financial loss incurred at the time of loss (e.g.. Prescription drug coverage)
Valued contract - ANSWER-The amount payable is determined regardless of the actual
amount of loss (e.g.. Life insurance)
Adverse Selection - ANSWER-Also known as "anti-selection". People are more likely to
buy insurance when they think they are going to suffer a loss
Underwriting - ANSWER-The process of determining whether a particular risk is one
that they want to take on and if so, what are appropriate premium levels to charge. Key
steps: identify risk (hazards) and classify risk
Risk Classes - ANSWER-Intended to group individual's risk of experiencing a similar
loss. Used to determine equitable premium rate for requested coverage. Generally 4
risk classes: declined, substandard (impaired), standard or preferred
Physical Hazard - ANSWER-Physical characteristics or conditions of an applicant that
may increase the chance of a loss
Moral Hazard - ANSWER-When the reputation, financial position or criminal record of
an applicant indicates that they may act dishonestly to increase the chance of incurring
a loss.
Plan Sponsor - ANSWER-The employer, organization or entity that sponsors the group
contract
,Advisor - ANSWER-The individual or companies that provide advise to group benefit
plan sponsors. There are several different types: a Consultant, an Agent and a Broker.
Plan Member - ANSWER-The individuals who are eligible to be insured under the
master contract. Coverage is the same for all individuals of a class. Plan members
require a certificate of insurance upon becoming covered.
Dependent - ANSWER-Generally the spouse or children of a plan member
Benefit - ANSWER-the amount payable when a covered loss is incurred
Premium - ANSWER-the determined amount that the policy holder must pay for a set
amount of insurance coverage
Master Application - ANSWER-request for group coverage that provides details required
to put the plan into effect
Group Contract/ Master Contract/ Policy - ANSWER-The legally binding document
outlining the insurance arrangement between an insurer and the group contract holder.
Governs the group and is signed and sponsored by the policyholder not the individuals.
Lays out: benefit coverage, insuring provisions, benefit provisions, general provisions
Unilateral Contract - ANSWER-the insurer continues to pay claims as long as the plan
sponsor makes premium payments
Group Policyholder - ANSWER-the plan sponsor organization that enters into the group
insurance contract. The policyholder signs the master contract, determines coverage
and levels, administers the plan and remits premiums
Benefit Plan Management - ANSWER-consists of plan design, plan funding and plan
administration
Single-Employer Plan - ANSWER-where plan members are employees who work for
one employer (who is the plan sponsor)
Multi-Employer Plan (MEP) - ANSWER-where plan members work for many companies
and are typically members of a union ( typically structured as a benefits trust)
Association Plan - ANSWER-the plan sponsor is an association
Creditor Plan - ANSWER-plan members are borrowers of the creditor (who is the plan
sponsor)
Funding Sources - ANSWER-relates to the amount of $$ available to the plan to provide
benefits to plan members and cover the costs of administration
, Funding Arrangements - ANSWER-relates to who assumes the financial liability for
paying claims and expenses - basic decision is to insure or self-insure
Underwriting - ANSWER-assessment of risk for the purpose of pricing group insurance -
determines the cost of expected claims plus admin. charges - this is how premium rates
are set
MEP Trust Fund - ANSWER-created to receive contributions from participating
employers and to pay benefits to members and/or to pay insurance premiums on their
behalf
MEP Trust Agreement - ANSWER-establishes the terms and conditions for the overall
trust management and empowers the trustees to make decisions related to the trust
operations - outlines finances and how $$ is managed)
MEP Participation Agreement - ANSWER-Used for employers not bound by the
collective agreement (or when a collective agreement doesn't specific contributions) - it
outlines the employers obligations including procedures for reporting eligible members,
making contributions and provides interest & penalties it the employer is delinquent
Insurance Solvency - ANSWER-the financial soundness of an insurance company -
largely regulated by the federal government as most insurance companies are
incorporated federally
Insurer's Market Conduct - ANSWER-regulation of this is the responsibility of provinces
and territories
Minimum Continuing Capital and Surplus Requirements (MCCSR) - ANSWER-the
minimum amount of capital an insurer is required to hold takes into account that the
actual payout may differ from the expected payout. Insurers must maintain 150% of all
possible claim payout
Legal Contracts - ANSWER-group insurances policies are legal contracts and therefore
subjected to contract law - it indicates the rights and obligations of all parties
Agent of Record - ANSWER-the individual/company authorized to represent an insured
in the purchase, servicing and maintenance of insurance coverage with a designed
insurer
Employee's Income - ANSWER-the remuneration paid to an employee over the course
of a tax year as money or the equivalent arising from the employment of the employee
Employer's Income - ANSWER-the net income that results from a business subject to
deductions for the costs of doing business including benefit costs