Sept 08 Exam Qu 1(iv) Free Cover Limit on Group PMI

Hello,

I'm a bit confused by Examiner's Report for Sept 08 Qu 1(iv), and was hoping someone might be able to shed some light.

The question is about underwriting practices on individual and group PMI business. In the Examiner's Report it mentions free cover limits for large groups.

I thought PMI was an indemnity product so does not have a sum assured. Without a sum assured how does a free cover limit work?

Thanks,
Lucy

 

Not sure as generally it would be things like death benefit.

However, could it be a function of the product design.

Is it possible to say you are automatically covered for up to £5000 total costs p.a without underwriting but if you want a higher limit then you must go through underwriting. Or I guess the cap could be a % of salary also.

If its low then yes underwriting free.

Anyone with more concrete thoughts/knowledge out there?!!!

 

Thanks for the reply.

Yes, I was thinking along the same lines... but I'm still a bit confused.

On my company group PMI policy (which I imagine is pretty typical) I think the p.a. maximum caps are the same for every member and an individual cannot change them. In this context I'm not sure that a free cover limit really makes any sense (since everyone would either be above it or everyone below it).


Have I got myself confused and missed something...Any thoughts?

 

I totally agree with you LucyLou and was also surprised to see this in the exam report for the reasons you set out.

Like bystander, I suppose the IDEA of "free cover" could apply where you have different levels of PMI cover applying to different classes of employee - e.g. managers have comprehensive cover but other staff have a budget plan - and only the managers were individually underwritten. However, in the exam, I wouldn't recommend calling it "free cover" with no explanation, because that would imply that you don't appreciate that PMI is an indemnity product.

I may be missing something too, so I'll see if I am able to get the examiners to shed any light on this. If I learn anything further, I'll let you know.

 

Thanks.

I've just had another thought.

The examiner's report says "free cover ...for large groups", and doesn't actually mention the word limit. So is it just that for large groups the insurer might choose not to individually underwrite anyone (irrespective of any kind benefit levels)?

 

Not sure in practice, but I doubt it.