Most small business owners are surprised when they discover that their business assumes much of the unfunded liability that results when you spread the risk of unpredictable Extended Health Care claims, like prescription drugs and medical expenses, among a small group of employees.

Going forward, group insurance providers will typically require an individual firm’s premiums to be 30% to 40% more than the value of claims paid, just for them to break even. This is then combined with assumptions for annual trend or inflation factors (typically 12% for Extended Health Care and 6% for Dental) and initial reserve requirements (typically 10%) that provides a further cushion to reduce their risk.

Statistically, with small businesses, claims will exceed expectations once out of every two or three years.  It is evident that this can leverage itself into some very significant premium increases, especially if marketing discounts were used to improve market share and create artificially low premiums in the first place.  Once an employee or their family member gets sick, it often ends up as a long term ongoing situation that is completely out of your control. We can all think of someone who has gone through this experience.

Our renewal philosophy is unique.  We base annual rate changes on the experience of the entire pool, which includes thousands of small businesses across the country.  Your firm’s claims experience is like a little ripple on a very big pond.   Because of this pooling, your group’s individual performance has little or no bearing on your renewal rates.  We have a very long track record and year after year strive for long term rate stability.   This year’s overall increase was less than 5%.

Insurance, when part of your payroll costs, should be both a sustainable and predictable expense.

Dave Broostad

Regional Coordinator

BBB Group Plan for Accredited Businesses

1-800-265-3052   www.fullcirclegroup.ca