By David Manning, Vice President, Group Underwriting
Symetra Life Insurance Company
Perhaps no other issues in the stop loss industry generate more questions than lasering and aggregating specifics. These mechanisms were designed to protect both the client and the carrier from excessive risk. In the right situations, they can be attractive alternatives to a carrier increasing premiums when ongoing claimants become a cost issue. Because neither of these pricing options is funded up front, the employer will ultimately not have to fund any risks assumed until an actual claim arises.
When is it appropriate to introduce a laser or an aggregating specific for your clients? Here’s Symetra’s take.
Lasering
Lasering, or excluding specific high-risk employees from coverage, shifts “known” liabilities from the carrier to the employer, and therefore is not always well received in the market. Acknowledging this, Symetra has perhaps the longest standing policy of not lasering at renewal in the market. Symetra will only introduce a laser option on new business quotes in extreme situations where a known claimant's condition and claim potential warrants it.
Symetra has a team of qualified registered nurses that regularly interface with our underwriters when assessing large-claimant information. This helps our underwriters understand the risk potential associated with a claimant, and helps us avoid taking an overly conservative approach when underwriting the claimant. The result is a consistent and aggressive approach in pricing large claimants which is passed on to the employer.
In today’s market, most lasered individuals on a policy do not incur claim dollars near the levels indicated in the lasered amount. This is mainly due to the process which identifies potential large claimants by reviewing current high-dollar individuals. In reality, over 80 percent of large claimants do not have large claim activity in the subsequent year. This is why the vast majority of individuals lasered by a carrier tend to ultimately not pose a financial burden to an employer, and why some savvy producers will recommend a laser option to their client over an increased premium alternative.
Aggregating Specifics, or Individual Advantage Deductibles
Aggregating specifics – or in Symetra’s terminology, Individual Advantage Deductibles (IADs) – were initially designed for cases that run well, but have high premiums due to a high frequency of expected specific claims. IADs can save an employer from “dollar swapping” risk for premium with a carrier, and from funding the carrier's expenses in the portion of standard premiums known as the employer's self-funded corridor.
For example, imagine a case with a standard premium level of $500,000, and the specific deductible level is $50,000. The carrier may expect seven to ten individuals in the course of the policy year to exceed the $50,000 deductible. Roughly $400,000 of the premium is what the carrier feels are expected claims, with the remaining $100,000 left for expenses.
The IAD is designed to shift a portion of that $400,000 (usually around 25 percent) back to the employer’s liability. So in this example, $100,000 would become the employer's self-funded corridor, or IAD, lowering the billed premium by the corridor amount. Now the $500,000 premium is reduced to $400,000 and the employer will have the responsibility of paying the first $100,000 of reimbursements. The carrier assumes liability after that. If the case has less than $100,000 of reimbursements, the employer keeps the difference.
Another use of the IAD is to fund “known” risk. Here, the IAD is used similar to a laser. The amount of the employer's corridor in the IAD is adjusted to accommodate the “known” risk, or claimant(s) expected claims.
Learn more
When ongoing claimant costs are threatening to increase an employer’s premium, lasers and IADs may be a cost-effective alternative. For more information about Symetra’s stop loss policies, visit us online, contact your regional manager  , or call our home office toll free at 1-800-426-7784.
David Manning is vice president of Group Underwriting for Symetra Life Insurance Company. He joined Symetra in 2004, and previously held the position of Underwriting Director at Hartford Life. He has 24 years of experience in the group insurance industry holding various underwriting and sales positions.
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| In the right situations, lasering and aggregating specifics can be attractive alternatives to increasing premiums when ongoing claimants become a cost issue. |
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