Question

What challenge is associated with setting the Free Cover Limit (FCL) too high in an employer-employee group insurance scheme?

a.

It reduces the overall attractiveness of the insurance scheme to employees.

b.

It may invite anti-selection, requiring careful consideration in setting these limits.

c.

It guarantees coverage for all employees, regardless of health status, without any risk.

d.

It decreases the insurance premium costs for the employer significantly.

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (b).It may invite anti-selection, requiring careful consideration in setting these limits. Explanation:Setting the Free Cover Limit (FCL) too high in an employer-employee group insurance scheme may invite anti-selection, which is a challenge that requires careful consideration in setting these limits. Anti-selection occurs when individuals who believe they are at higher risk of claiming are more likely to take out or increase their insurance coverage than the average risk. By setting FCL too high, the scheme might attract a disproportionate number of higher-risk individuals, potentially increasing the overall cost of claims for the insurer. This challenge necessitates a balanced approach in determining the FCL to ensure that it offers sufficient coverage without unduly increasing the risk of adverse selection.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. What challenge is associated with setting the Free Cover Limit (FCL) too high in an employer-employee group insurance scheme?
Add Comment

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. How does the size of an employer-employee group affect the Free Cover Limit (FCL) set by insurers?

View solution

Q. What underwriting requirements may an insurer impose for coverage amounts exceeding the Free Cover Limit (FCL)?

View solution

Q. What distinguishes compulsory plans from voluntary plans in employer-employee group insurance schemes?

View solution

Q. What is a potential advantage of voluntary plans in employer-employee group insurance schemes?

View solution

Q. What is a key characteristic of salary savings schemes for employer and employee groups in India?

View solution

Q. What is one of the basic requirements for designing a group insurance scheme to prevent anti-selection?

View solution

Q. What is the purpose of having an automatic basis to determine the level of coverage per employee in a group insurance scheme?

View solution

Q. Who is typically eligible for insurance cover in a group insurance scheme?

View solution

Q. What additional eligibility condition may apply for employees to qualify for insurance coverage?

View solution

Q. What is the purpose of a waiting period in a group insurance scheme?

View solution

Q. When does coverage typically cease in a group insurance scheme?

View solution

Q. How is disability handled in group insurance schemes in some developed countries?

View solution

Q. Which approach provides extended death benefit coverage for employees who become totally disabled prior to retirement age?

View solution

Q. What is typically required for continued waiver of premium in group insurance schemes?

View solution

Q. How does a new group term plan come into existence?

View solution

Q. Which of the following is NOT typically included in the general description of a group insurance product?

View solution

Q. Which of the following is a requirement specified in the Form IRDA-Life-Non Linked-NP for insurers to file a group term product to IRDA of India?

View solution

Q. What aspect of group insurance product design helps avoid anti-selection by individuals within a group?

View solution

Q. What information is typically required to be provided under the heading "Reinsurance" when filing a group term product with IRDA of India?

View solution

Q. Which of the following parameters is typically included in the financial projections section when filing a group term product with IRDA of India?

View solution
View All MCQs on IC 92 Actuarial Aspects of Product Development

Recommended Subjects

Are you eager to expand your knowledge beyond IC 92 Actuarial Aspects of Product Development? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!

Basic Chemical Engineering

Get a solid foundation in Chemical Engineering with our Basic Chemical Engineering...

Professional Communication

Hone your communication skills with our Professional Communication category. Enhance...

Molecular Biology

Dive into the intricate world of molecular biology with our specialized category....

Sociology

Gain insights into human behavior and society with our Sociology category. Explore...

Instrumentation Transducers

Master the art of instrumentation and transducers with our specialized category....

Irrigation Engineering

Master the science of Irrigation Engineering with our dedicated category. Explore...

Microbiology

Uncover the fascinating world of microbes with our Microbiology category. Delve into...

Mass Transfer

Delve into the science of Mass Transfer with our specialized category. Explore...

Total Quality Management

Enhance your understanding of quality management with our Total Quality Management...