Hi All,
I did the above question and part of the answer isn’t clicking for me. The question asks what a group insurer should consider when calculating the premium to charge an employer in the following year (premiums annually reviewable). The economic environment is bad and the employer is expecting there to be many redundancies. The product is Critical illness.
“ The insurer will need to account for adverse selection in redundancy.
i.e. younger/healthier people more likely to be kept on”
If younger/healthier workers get kept on , how would that be adverse selection? Isn’t that the opposite?
I understand for IP and PMI there can be adverse selection as job security reduces people are more likely to claim but didn’t think this would apply to CI. You either have a CI or you don’t. I can’t imagine people not claiming on a CI because they’re employed.
Am I missing something?
Cheers,
D
I did the above question and part of the answer isn’t clicking for me. The question asks what a group insurer should consider when calculating the premium to charge an employer in the following year (premiums annually reviewable). The economic environment is bad and the employer is expecting there to be many redundancies. The product is Critical illness.
“ The insurer will need to account for adverse selection in redundancy.
i.e. younger/healthier people more likely to be kept on”
If younger/healthier workers get kept on , how would that be adverse selection? Isn’t that the opposite?
I understand for IP and PMI there can be adverse selection as job security reduces people are more likely to claim but didn’t think this would apply to CI. You either have a CI or you don’t. I can’t imagine people not claiming on a CI because they’re employed.
Am I missing something?
Cheers,
D