South Carolina Insurance Practice Exam

What information is typically used by underwriters to determine insurance coverage and premium rates for a group health policy?

1. Current employee salaries

2. Claim history of the group

3. Experience rating

4. Employee demographics

The correct answer is: Experience rating

Underwriters rely on various types of information to assess risk and establish coverage terms and premium rates for group health policies. Experience rating is particularly significant as it takes into account the historical claims experience of the group, allowing underwriters to evaluate how often and how severely claims have been made in the past. By analyzing the group's specific claim history, underwriters can identify patterns, frequency, and severity of claims, which ultimately influences the cost of premiums. Experience rating provides a more tailored approach, helping insurers align prices with the actual risk presented by the group. While employee demographics can also play a role in assessing risk – such as age, gender, and health status – and current employee salaries may be relevant in understanding coverage limits or benefits, the experience rating directly ties past claims experience to future cost expectations. Thus, it is a crucial component in determining appropriate pricing for group health insurance.