Acceptable Loss Ratio The ratio of claims to premium expected by an insurance company based on the claims in their block of business. If a group has a loss ratio equal to the Acceptable Loss Ratio, the rate adjustment at renewal will reflect only Trend Factor.

Accidental Death and Dismemberment (AD&D):  A supplementary benefit rider designed to pay benefits in the event of death or the loss of a limb or sight caused by an unintended, unforeseen, and unexpected event.

Administration: These charges represent your insurer's cost of implementing and maintaining your plan. This fee encompasses printing, data processing, claims payment, accounting and record keeping generally expressed as a percentage of claims.

Adjudication: The assessment of claims for accuracy.  Actions taken to validate claims, validate eligibility, and allow or disallow claims as per contract specifications.

Any occupation The definition of disability under which the insurer has most control. In order to continue receiving disability income benefits the disabled employee must be unable, due to illness or injury, to perform any job for which he/she is reasonably suited by training, education or experience.

Basic Dental Covers check-ups, cleaning, x-rays, fillings and extractions. Some basic plans will include endodontic and periodontal coverage. Repair and refurbishing of dentures is also usually included.

Canada Pension Plan (CPP) A plan run by the government of Canada to provide retirement and disability benefits to contributors.

Capping: A maximum dollar amount placed on a specific benefit. A cost containment measure to control utilization.

Claims Experience The history of claims and premiums developed by a group over a period of time. The group can be employees of a company or members of an association.

Contribution plan: A group insurance plan that requires that the employee participates in premium payments for a percentage of the required premium monthly.

Cost Plus A self-insuring vehicle using a third party service provider. A cost plus plan can operate in conjunction with an insured plan or on its own. There is no insurance and the expenses processed through the plan are a deductible expense to the employer. A benefit received by the employee is considered an insurance benefit and so is not a taxable benefit.

Critical Illness Insurance is a benefit which will pay a pre-determined lump sum to the insured person if they suffer from one of the illnesses named in the policy.

Dental Fee Guide A schedule of fees posted by most provincial dental associations and is a suggested fee guide for routine services. Some dentists will not charge the current fee guide, while some specialists will charge more than the fee guide because they are specialists.

Dependant Life: A form of term insurance in a group plan that covers an employee's spouse and each unmarried child as defined by the policy.

Disability: A medically determinable physical or mental impairment caused by injury or illness, preventing one from performing duties of any occupation.

Drug Identification numbers (DINs): The Drug Identification Number (DIN) is the number located on the label of prescription and over-the-counter drug products that have been evaluated by the Therapeutic Products Directorate (TPD) and approved for sale in Canada. 

Experience: Dollar value of total claims made against a plan by entitled participants. Experience may be reported as PAID or as INCURRED. Paid claims are actual dollars paid. Incurred claims are claims that have been grossed up to reflect inflation and utilization projections, administration fees, reserve fees  profit or a combination of factors depending on the carrier.

Experience Rated: The process of rating experience. Experience being raw claim amounts for Drug, EHC, Dental and vision. The process of rating experience by applying to every $1 dollar claimed an amount equal to the administration expense generated to process that claim. Next, the inflation factor and a utilization projection. These figures are compounded to allow for inflation pressures on administration costs. Next, a reserve factor to allow for unpredictable claims, claims run off if cancellation occurs and an amount required for profit.

Experience rated benefits are not insurance. Health and dental rates are based on your experience (claims) grossed up to cover costs, inflation, unpredictable claims and profit.

First Manifest Provision: Provision that eliminates disability claims for injuries or sicknesses manifesting prior to the policy effective date.

Inflation: Inflation is the increase in the price of goods and services over a period of time and the resulting loss of purchasing power of Money. Insurance industry average health inflation trend factor is between 15%-19% calculated in advance.

Incurred: Incurred claims, Incurred but not reported claim reserves or IBNR. A method of accounting called accrual used to recognize liability at the time it occurs. Changes in the IBNR are added to Paid Claims to estimate the carrier's potential liability during a reporting period. Paid Claims are adjusted by the IBNR and stated as Incurred Claims.

Incurred Claims A figure used by insurers to take into account a reserve they hold for claims which have been incurred but have not yet been reported to the insurer. In the event of termination of the plan, claims incurred during the term of the policy would still be paid even if submitted after the fact.

Injury: Accidental Bodily harm causing sustainable damage.  An injury can be the cause of disability but it must be assessed as the cause by a physician and supported by objective medical evidence.

Insurance Provider: The Company that issues an insurance policy and assumes the risks associated with the insured.

Life Insurance: Provides coverage where the risk insured against is the death of a particular person (the life insured). Upon the death of the life insured, while the policy is in force, the insurance company (the insurer) will pay the death benefit to the beneficiary named in the insurance policy.

Long Term Disability: Typically provides coverage for 2 years, 5 years, or to the claimant's age 65, according to disability as defined in the policy. Provides monthly payments to replace lost income due to disability.

Non-taxable Disability Benefits are those for which the employee pays the full premium. This can be applied equally to short term and long term disability benefit..

Optional Life Additional life insurance available on an elective basis for employees and, on occasion, their dependents. It is generally available only after providing satisfactory evidence of insurability.

Own Occupation The definition of disability most favourable to the insured person. It is generally applicable only to people in professional jobs and is very uncommon in group insurance. A disabled person can continue to receive disability income benefits if they are unable to perform the duties of their own occupation, even if they can perform another occupation for gain or profiT.

Paid Claims The total of claims actually paid during a period – generally a policy year.

Pooling or Pooled Benefits: These Benefits are covered by Insurance for catastrophic events representing risks that are unanticipated by nature. To realize a level of predictability an insurer consolidates all policy holders premiums into one massive pool. A Pooled benefit represents the sharing of risk between policy holders and is the essence of insurance.

Pooling Experience Rated Benefits: Pooling part of your drug and health benefits in a traditional premium plan is insurance against catastrophic large claims or stop-loss insurance. This removes the cost of claims above the stop-loss amount from a companies experience rated claims. Occurrences of catastrophic claims are exceptions, unanticipated and unpredictable. The cost of re-insurance, plus profit and handling is then added to the cost of experience rated premiums. This form of stop-loss may protect the insurance carrier from profit erosion more than it protects a plan holder.

Predictable Claims: Predictable claims are those with high frequency of use but with a low dollar value. These claims are easily trended and analyzed. These are Experience Rated claims such as routine Drug claims, Maintenance Drug claims, Routine Dental Care, normal Vision Care, and Short Term Disability.

Regular Occupation The most common definition of disability in group insurance long-term disability plans. Benefits will be paid for the period stated (usually up to two years) if the insured employee is unable to perform the duties of his regular occupation. After the period of ‘regular occupation' coverage specified in the policy the definition will change to ‘any occupation.'

Reserve Adjustment: At renewal an insurer will protect themselves from the deferred liability of claims run off should a plan be cancelled. The insurer is still responsible for unpaid claims not yet reported. This risk is mitigated by a surcharge to your rates, better known as a reserve adjustment expressed as a percentage of your prior years claims and must be adjusted to meet the insurer's requirements at each renewal. Industry Average requirements are from 8% - 24%.

Self Funding: Self- Insuring: The process of developing a Self Funding Plan to pay for portions of an Employee Group Benefit Plan.

Sickness: A disease or illness causing bodily harm and eventually permanent damage.  If a sickness leads to disability, the ?First Manifest Provision? may be exercised.  A sickness also must be assessed by a physician.

Stop-Loss:  An Insured dollar amount above which the cost of claims are the responsibility of an Insurance carrier. A Company can mitigate risk by carefully analyzing the amount of risk that is reasonable and profitable beyond which stop-loss insurance is purchased to cover extraordinary claimS.

Target Loss Ratio – see Acceptable Loss Ratio

Taxable Disability Benefits Those on which the employer pays ANY of the premium. The rate of contribution does not allow for pro-rating the taxability.

Trend Factor The factor used by insurers to allow for increases in expenses anticipated over the coming policy year. The factor is affected by inflation, the de-listing of services by the provincial health plans, and the introduction of new courses of treatment and new therapies and drugs.

Unpredictable Claims: Unpredictable claim are large, unanticipated and can pose significant financial hardship. Claims for loss of life, disability claims, large drug claims, Out of Country emergencies, and nursing services, are examples of unpredictable claims. Self funding these potential claims are not recommended for Small or Mid Size Companies. Insurance coverage is the recommended risk management tool for this class of benefit.

Utilization: Use, the act of using. Utilization trends effect the cost of a tradional benefit program. Increased use would result in an increase while decreased utilization may or may not result in reduced rates.

Weekly Indemnity: Weekly Indemnity or Short Term Disability (STD) coverage is protection against disabilities for a shorter duration of time as described by the master policy.

WCB Workers' Compensation Board

Yearly Renewable Term (YRT) The phrase which describes the basis on which most group life and disability insurance is issued. Rates are recalculated each year and will change based on the demographics within the group. The claims experience will have an increasing impact on renewal rates as the group gets larger.