Glossary of Terms

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Accident and Sickness
Used interchangeably with weekly indemnity, weekly income and weekly disability to mean short-term income replacement because of disability due to accident or iIlness.

Actively at Work
A phrase used to define when coverage begins for an individual employee. Some contracts “tighten” the definition by requiring a period of being actively on the job and on the premises before coverage commences.

Addition
A person who becomes insured subsequent to the effective date of the group policy.

Administrative Manual
The manual of instructions provided by the insurer to the policyholder that outlines and explains those duties required of the plan administrator.

Administrative Service Only (ASO)
Services provided by an insurer or its subsidiary on a contract basis. Services may include actuarial, plan design, claim handling, benefit communications, financial advice, preparation of data for government reports or stop-loss coverage. The insurer provides these services for self-funded plans.

Adverse Selection
The tendency of persons with poorer than average health expectations to apply for or continue insurance coverage to a greater extent than persons with average or better-than-average health expectations.

Allocated Benefits
Benefits with the maximum amount payable for specific services is itemized on the group contract.

Anniversary
Used to refer to the date one year (or more) following the effective date of the master contract. It is the target for renewal action such as rate increases and rate credits.

Assignment
Pertains to the transfer of an insured’s rights. In life insurance, it means conveying the benefits to a third party. Each carrier has its own rules for this. In the context of medical care, assignment means signing over reimbursement rights to a hospital or another supplier of care.

Association Group Insurance
Group insurance provided to a professional or trade association top rated eligible members under one master policy.

Automatic Restoration Provision
Generally included in a plan with maximum lifetime benefits. This provision reinstates all or a portion of used benefits each year.

Basic Compensation
The base salary or wages paid to an employee on which benefits and/or contributions are based. Overtime, bonuses, and other unusual compensation are excluded.

Beneficiary
Person or persons designated by the insured to receive the benefits of insurance at death. In group health insurance, the beneficiary is the person designated to receive any accidental death benefit.

Benefit Period
In reference to health insurance, the maximum length of time benefits will be paid for anyone accident, disability, iIlness or hospital stay.

Billed Premium
Premium that has been paid to the policyholder for the indicated time period.

Blue Cross
An independent, non-profit, membership corporation providing protection against the costs of health and dental care in a limited geographical area.

Booklet
A pamphlet distributed to the insured describing, in layman’s language, the provisions of the group plan.

Booklet certificate
A booklet that serves as both an explanation of the group plan and as the certificate of insurance.

Broker
Because not all companies offer their group plans to all group sizes, much group insurance is written as surplus business by life insurance agents. The bulk of group insurance, particularly of large-size cases, is written by insurance brokers who obtain quotations from a series of carriers, analyze them, and present the plan that best meets the needs and finances of the buyer.

Cafeteria Plan
See Flexible Benefit Program.

Calendar Plan
Used in major medical to describe the operation of deductibles and/or benefits limits. In other words, a deductible may apply once within a calendar period and the maximum benefit payable may be described in terms of a given sum within a particular calendar year.

Canada Pension Plan (CPP)
A federal government sponsored plan providing a death benefit and retirement/survivor/disability pensions. This is a contributory, earnings related supplementary plan.

Carrier
The insuring insurance company.

Census Data
Because each group is underwritten and rated on the basis of the people who make up the group, a rather complete census must be made. Most insurance companies have specific “census forms” with pertinent information concerning all employees to be enrolled in the group plan.

Certificate of Insurance
A document delivered to an individual summarizing the benefits and principal provisions of the group contract under which the person is insured.

Claim
A demand by an insured person for the benefits provided by the group contract.

Classes
Refers to classes of coverage. Generally, life insurance and weekly indemnity are offered on a class basis, with larger benefits for highly paid workers and lesser benefits for other employees.

Coinsurance
Not all health or dental charges are necessarily reimbursed at 100%.

Common Disaster
As group life insurance limits grow, more individual life insurance factors come into play. One of these is the provision for common disaster, which stipulates that the insured is deemed to have survived the spouse beneficiary if the spouse beneficiary does not survive a specified time period.

Community Rating
Refers to the practice of grouping all insured groups in a given area for experience purposes, thus basing the costs on the general experience and level of costs in the area. It is rarely used in group insurance and is generally associated with prepayment plans. Insurance carriers rate by individual case experience or, where small risks are involved, by pools that are not geographical in nature.

Composite Rates
When different rates are combined to arrive at an average, the result is termed a “composite rate”. A good example is the dependent rate which makes no distinction between workers who have one child or a dozen.

Consultant
A person or firm hired by an employer, usually on a fee basis, to design, install and/or service employee benefit plans.

Contributory
Group plans use “contributory” to designate situations in which the insured pays part of the premium. The alternative is “non-contributory”, meaning employer-pays-all.

Convalescent Care
This refers to care in an extended-care facility, as opposed to care in a general hospital.

Conversion
Group life laws generally require that benefits lost on termination of employment be “converted” into individual life insurance, without evidence of good health.

Coordination
Where both a worker and spouse are covered by different plans, coordination language permits full recovery between the two carriers involved, but eliminates full reimbursement by either carrier.

Credibility
The weight given to your claims experience in determining your renewal rates.

Creditor
Creditor group life is a form of group life insurance used primarily to insure the unpaid balance of instalment purchases, such as mortgages, appliances or automobiles Variations might include accumulation plans such as mutual funds. Some carriers offer disability income creditor group insurance as well.

Cutbacks
A cutback is a reduction in the life insurance benefit. This device is used to keep life insurance rates from zooming out of sight, especially when there is substantial coverage on older and retired workers, recognizing that for most people aged 65 and 70, the critical life insurance needs no longer exists.

Deductible
The amount that must be paid by the insured before benefits are paid by the insurer.

Defined Benefit Program
A plan in which specified benefits are offered at a stated cost to employees who have no choice-other than to participate in the plan.

Defined Contribution Program
A plan in which the employer pays a set premium for selected benefits that may change as the group’s needs change.

Dependent Life
This is life insurance issued in fractional amounts on the spouse and children of an insured employee.

Earnings Schedule
A type of insurance schedule in which coverage is determined by the insured’s earnings.

Employee Assistance Program (EAP)
A program designed to help employees and their families through confidential counselling.

Employee Benefit Program
A program of benefits provided to employees by the employer. All benefits – aside from salary or wages – are included, such as group life and health plans, retirement plans and vacation days. Sometimes they are called “fringe benefits”.

Employee Pay All Benefit
A benefit within a group which the insured pays the premium.

Enrolment
The process of explaining a proposed group plan to eligible persons and helping them complete their applications for coverage under the plan.

Evidence of Insurability
Proof of a person’s physical condition and/or factual information about a person’s health that might affect insurance acceptability.

Exclusions
A standard feature of contracts issued by every company is the list of items that are not covered by the contract. These should be pointed out to the buyer in the delivery interview.

Experience
Refers to the premium claim history of a given risk. The larger the risk, the more valid the ratio of claims to premiums. Generally, to arrive at rates that commensurate with expected losses, small risks are pooled and evaluated as a group to determine the experience.

Extended Health Care
Form of insurance which provides, in one policy, protection for hospital and medical expenses not covered by provincial health care programs. It usually includes other health care expenses such as prescription drugs, medical appliances, ambulance, semi-private or private coverage and nursing.

Facility of Payment
This term is primarily a claim clause that enables the early settlement or partial settlement of proceeds in the event the insured is incapable of complying with the usual claim requirements.

Flexible Benefit Program
A plan that allows employees to choose from a selection (or “menu”) of benefits that best suit their individual needs. Also known as a “cafeteria” or “flex” plan.

Green Shield
An independent, non-profit, membership corporation providing protection against the cost of health and dental care in a limited geographical area.

Group
A number of people classed together by some common factor, such as place of employment, occupation or membership in an organization.

Group Contract
A contract of insurance made with an employer or other entity that covers individuals in the group by reference to their relationship to that employer or entity.

Group Insurance
Insurance issued, usually without medical evidence on a group of people under a master contract. It is normally issued to an employer for the benefits of employees. The individual members of the group hold certificates as evidence of their insurance.

Group Ordinary
Level premium ordinary life insurance issued on a group basis.

Group Permanent
Describes a variation from the standard group life plan, which is a yearly renewable term life insurance. In group permanent, the insured worker has permanent, portable, cash-value life insurance for a contribution and the employer pays for additional term to reach the face amount of the certificate.

Group Representative
An employee of the insurer whose principal tasks are to assist agents and brokers in developing and soliciting prospects for group insurance promoting, presenting, installing and servicing group contracts.

Group Universal Life (GUL)
A group plan that combines group term with a cash accumulation feature. It includes only plans that involve a master contract between the insurer and the employer. Most companies issue the master contract to a trust rather than to the employer. Participating employees receive certificates as evidence of coverage. The employee pays all premiums, and participation is voluntary.

Handicapped Child
Many contracts now carry a specific provision for the continuing coverage of child dependents, regardless of age, if a handicap arose while the child was covered under the group plan.

Home Health Care
The concept of administrating health care services in patients’ homes using nurses or health aids.

Home Office
Under this type of administration, all records needed to determine insurance status and to calculate premiums are maintained by the insurer.

HSA – Health Spending Account
Health Spending Account or Health Savings Account – A health spending account is a self-directed, self-funded account in Canada into which you pay monthly HSA fees. HSA healthcare plans differ from traditional insurance because you design your plan based on your budget and your needs, plus you never lose what you don’t use.

Identification (ID) Card
Some companies issue these cards routinely; others, only when requested. The ID card advises the medical care facility that a patient is covered by insurance and usually described the plan or refers the hospital to a telephone number to call for information.

Incorporated Company
Incorporated Company -The extended liability protection is one of the main reasons that businesses choose incorporation. Theoretically, no member of the company can be held personally liable for the debts, obligations, or acts of the company. A shareholder is only liable for the unpaid portion of shares owned.

Incorporation may be done provincially, giving a company the right to operate under its corporate name in a particular province. Federal incorporation gives a company the right to operate under its corporate name throughout Canada.

Incurred
Group people speak of two sorts of claims: paid and incurred. Paid claims afford specific known data since cashed checks or drafts have to come back to the carrier to match reimbursement payments. However, there are always some claims on which the carrier has no record because they have not been reported or because certain papers are missing.

Incurred But Not Reported Reserve (IBNR)
A portion of the group benefit plan premium that is set aside for claims that are incurred in one contract year but are not reported until the next contract year.

Incurred Claims
Claims that have been paid out plus an estimate of claims which have occurred but have not yet been reported to the insurance company.

Incurred Loss Ratio
The incurred loss ratios are calculated by dividing the billed premium by the incurred claims (paid claims + reserves).

Indemnity
A contract that pays a specific amount when certain conditions are met, rather than reimbursing for actual costs. Thus, life insurance, accidental death and dismemberment, and weekly indemnity are “indemnity” rather than reimbursement benefits. There are certain hospital plans that indemnity, that is, pay a specified amount per day, for each day a room-and-board charge is made.

Insurance Year of Birth
As in individual life insurance, an insured person’s age changes six months following his or her last birthday. For this reason, date of birth rather than year of birth is required on group enrolment documents.

Irrevocable Beneficiary
Beneficiary appointed cannot be changed except with the beneficiary’s consent.

Late Entrant
Describes an employee who defers enrolment beyond the contractual enrolment period and then decides to become insured. Because of the change of heart, evidence of insurability is usually required to make certain that the applicant is not selecting against the plan, that is, buying insurance “when the roof is afire”.

Level Plan
This flat schedule contrasts with a graded schedule where different benefits are offered to different classes of people. In a level plan, everyone receives the same benefits, regardless of salary or position.

Limitations
As is true of exclusions, limitations or restrictions are part of most contracts and help to define the limits of coverage. As they tend to prevent abuses, limitations serve to keep premiums from escalating. Limitations should be understood by all of the parties involved.

Limited Company
Limited company – A company that is incorporated.

List Bill (also called roster bill)
To ease the administration of small groups, many carriers use a premium statement that lists all of the participants and their premiums. This affords the plan administrator an instant check list of covered employees, provides the benefits and the amount to be withheld.

Long- Term Disability (LTD)
It provides disability income protection, generally after a four-month hiatus, for a stated period of time or to age 65, for accident or sickness incurred disability. Each carrier has special considerations that must be understood. Long-term disability often produces higher severity claims than does death.

Master Policy
Issued to the employer or other sponsor of a group insurance plan, the master policy contains all of the insuring clauses necessary to define the benefits to be paid.

Multiple Employer Trust (MET)
These trusts enable small units to combine to purchase group coverage.

Master Policy
Issued to the employer or other sponsor of a group insurance plan, the master policy contains all of the insuring clauses necessary to define the benefits to be paid.

Multiple Employer Trust (MET)
These trusts enable small units to combine to purchase group coverage.

Negotiated Plan
Applies to the fringe benefits for members of a labour union. Benefits that were determined under a bargaining agreement.

Package
To market group insurance to small firms, many carriers use the “package” approach. In other words, there are certain fixed combinations of benefits for which the firm and its employees can apply. This eases the preparation of contracts, eliminates some enrolment materials and facilitates billing and claim settlement. Each carrier has its own set of packages, so a broker should become familiar with what the carrier offers.

Paid Claims
Claims that were actually paid during the indicated time period.

Paid Loss Ratio
Actual paid claims divided by premiums.

Pharmacare Plans
Provincial government plans for payment of prescription drugs to all residents of that province.

Plan Administrator
Person appointed by an employer to administer a group plan.

Point of Sales Claim Adjudication (P.O.S.)
Employees present a magnetized or “Smart Card” when they purchase a prescription, visit a dentist or other provider. The pharmacist or provider uses a terminal to read the card and access employee plan information. The claim is a verified service and a record is set up for transfer of funds from the insurance company to the provider.

Pooling
One way to establish a viable relationship between premiums and claims – when covering small units – is to put such units into a common pool and evaluate the entire pool. This means units with fewer or small claims subsidize the units with many or big claims. Pooling is the basic principle of all insurance and should be communicated as such.

Provincial Health Plans
Provincial government plans providing basic hospital and medical care. Some may provide dental coverage.

Quebec Pension Plan (QPP)
Similar to the Canada Pension Plan but applies only to Quebec residents. See Canada Pension Plan for definition.

Rehabilitation
This term comes into play largely in connection with long-term disability. (See Long- Term Disability [LTD]). Many, if not most, LTD contracts recognize that for social, moral and economic reasons, the disabled should be encouraged to get back into the mainstream of life through such things as learning to cope with disability or develop a different occupation. The rehabilitation clause enables the claimant to receive some benefits even while seeking reemployment and retraining.

Reimbursement
Most medical care insurance is on a reimbursement basis. That is, benefits are based on actual charges made and no more. In many instances, this rules out treatment in governmental facilities that do not require that the patient pay for care.

Reinstatement
Many major medical contracts provide that when portions of the maximum benefit have been exhausted in prior claims, they will be reinstated following a specified period during which no benefits are paid out.

Reinsurance
To achieve certain limits of coverage, a carrier will frequently award part of the coverage to another insurer. In some instances, this could impose additional requirements for you, but you will be advised on a per case basis of these needs.

Relative Value Schedule
In an attempt to keep dental allowances current with prevailing surgeon’s fees, surgical procedures are rated on a scale of difficulty. Thus, an appendectomy may be six times more complicated than a tonsillectomy and the allowance-is-graded accordingly.

Reserves
You will probably hear this term in connection with the year-end analysis of the experience of the pool or of the risk itself. The carrier must maintain certain legal reserves (plus amounts for incurred but unknown claims).

Retention
Ordinarily the term “retention” will not come up within the context of small-group plans. In large-group cases, retention is the amount after claims that the carrier feels is needed to run the plan, pay taxes, etc. Some carriers include commissions as retention items.

Risk Charge
Some carriers apply a risk charge in computing renewal rates, thereby assessing each account with a proportionate share of the overall experience of a class of business.

Room and Board
Extended health care plans usually provide reimbursement for semi- private or private room rates.

Self-Administration
In this type of administration, the administrative function is performed by the policyholder. This is more common for groups of 100 or more people where the policy owner has the facility to meet the demand of the administrative responsibility.

Self-insurance
Self-insurance is “having no formal plan with a particular carrier”.

Service Schedule
You may encounter service schedules on older group plans, where the benefits are graded on the basis of employees years of service, with the highest benefit for the most senior employee. Service schedules are generally frowned on by most underwriters.

Sole Proprietor
Sole Proprietor – You are a sole proprietor (self-employed individual) if:

Your business is not incorporated;
You have sole responsibility for decision making;
You receive all profits and are responsible for all losses; and
You report your business income on a T1 Individual income tax return.

Specification Letters
You will encounter these only on large-group cases. They are drawn up by a broker or consultant to determine detailed handling of various aspects of a group. The questions asked may rule out certain bids.

Statement of Health
The form used to establish the insurability of an applicant who did not enroll when first eligible or who re-enrolls. The statement asks specific questions about recent medical treatment and requests the insured’s authorization to check this information with hospitals and attending physicians.

Stop-Loss Provisions
Provisions that minimize fluctuations in claims experience as an insurance company’s charge for carrying the risk.

Target (or Break-Even) Loss Ratio
The percentage of your group’s premiums that is deemed sufficient to cover your claims. Rate increases or decreases are based, in part, on the degree to which your claims exceed or fall below the target loss ratio.

Target Claims
The predicted dollar value of your group’s claims. Rate increases or decreases are based, in part, on the degree to which your actual claims exceed for fall below the target claims. Note: target claims are calculated as premium times target loss ratio.

Third-party Administrator (TPA)
The party to an employee benefit plan that may collect premiums, pay claims, and/or provide administrative services. Usually, the TP A is an off-site professional firm.

Transferred Business
Underwriters use this term to refer to group insurance that has been in force with another carrier. The home office is vitally interested in knowing why such business did not renew with the prior carrier.

Trend Factor
The factor used to project the increasing cost of providing benefits.

Trended Loss Ratio
Is calculated by multiplying the incurred loss ratio by the trend factor in the current year. Previous years you have to double (year 2) / triple (year 3) the trend factor. Basically they are trying to show trend in today’s dollars for previous years. This is what is presented graphically on our renewals for the trended loss ratio.

Trust Agreement
When group insurance is contracted through a third party such as an association, a trust instrument establishes the basis for dealing with the carrier and with the component units. Each unit must become a signatory in the final agreement.

Target (or Break-Even) Loss Ratio
The percentage of your group’s premiums that is deemed sufficient to cover your claims. Rate increases or decreases are based, in part, on the degree to which your claims exceed or fall below the target loss ratio.

Target Claims
The predicted dollar value of your group’s claims. Rate increases or decreases are based, in part, on the degree to which your actual claims exceed for fall below the target claims. Note: target claims are calculated as premium times target loss ratio.

Third-party Administrator (TPA)
The party to an employee benefit plan that may collect premiums, pay claims, and/or provide administrative services. Usually, the TP A is an off-site professional firm.

Transferred Business
Underwriters use this term to refer to group insurance that has been in force with another carrier. The home office is vitally interested in knowing why such business did not renew with the prior carrier.

Trend Factor
The factor used to project the increasing cost of providing benefits.

Trended Loss Ratio
Is calculated by multiplying the incurred loss ratio by the trend factor in the current year. Previous years you have to double (year 2) / triple (year 3) the trend factor. Basically they are trying to show trend in today’s dollars for previous years. This is what is presented graphically on our renewals for the trended loss ratio.

Trust Agreement
When group insurance is contracted through a third party such as an association, a trust instrument establishes the basis for dealing with the carrier and with the component units. Each unit must become a signatory in the final agreement.

Unemployment Insurance Commission (UIC)
A federal government body providing a weekly income benefit to replace income loss due to unemployment, disability or maternity leave.

Waiting Period
There are two kinds of waiting periods. One concerns the eligibility of new employees for insurance coverage benefits. In certain types of businesses, it is practical to enroll only those employees who have remained in the job a specified number of months. For example, after two months on the job, the employee becomes eligible.

The other type of waiting period is the hiatus between the onset of a disability and the date that the disability benefits commence. In a typical weekly indemnity plan, for example, the first eight days of an illness might satisfy the waiting period.

Waiver Card
This important enrolment document affords the employer positive proof that the plan was communicated to the employee and the employee opted against enrolling in the plan. Psychologically, it has the effect of making the reluctant employee reconsider before signing away important benefits.

Weight
The weight given to each year of claims experience.

Wellness
A health care concept that focuses on staying healthy through a planned life-style, rather than treating illness after it has developed.

Workers’ Compensation
A provincial government body providing compensation due to any bodily injury arising of or in the course of an employee’s employment.

Yearly Renewable Term (YRT)
Most group life insurance in force today is YRT. Although it is assumed that the coverage will renew each year, there is a year-end calculation based on the present ages of the participants. If there bas been no employee turnover during the year, the rate should increase because all employees will be a year older. In practice, when older people retire, they are replaced by younger workers, so the life rate might actually go down.

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