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GBA 1 Canada - Key Terms Questions and Answers 100% Correct 2024
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GBA 1 Canada - Key Terms
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GBA 1 Canada - Key TermsGroup Benefits Plan - answer Any type of plan that provides benefits to plan members as one group, independent of government-sponsored benefits
Speculative Risk - answer Assumed as a conscious choice and involves three possible outcomes: loss, gain or no change
Pure Risk - answer Related to events outside the risk takers control. The only possible outcome is loss - Insurance only covers this type of risk
Personal Risk - answer Arises from the possibilities of death, poor health or outliving savings
Loss Rate - answer the number and timing of losses
Contract of Indemnity - answer The amount payable is based on the actual amount of financial loss incurred at the time of loss (e.g.. Prescription drug coverage)
Valued contract - answer The amount payable is determined regardless of the actual
amount of loss (e.g.. Life insurance)
Adverse Selection - answer Also known as "anti-selection". People are more likely to
buy insurance when they think they are going to suffer a loss
Underwriting - answer The process of determining whether a particular risk is one that they want to take on and if so, what are appropriate premium levels to charge. Key steps: identify risk (hazards) and classify risk
Risk Classes - answer Intended to group individual's risk of experiencing a similar loss. Used to determine equitable premium rate for requested coverage. Generally 4 risk classes: declined, substandard (impaired), standard or preferred
Physical Hazard - answer Physical characteristics or conditions of an applicant that may increase the chance of a loss
Moral Hazard - answer When the reputation, financial position or criminal record of an applicant indicates that they may act dishonestly to increase the chance of incurring a loss. Plan Sponsor - answer The employer, organization or entity that sponsors the group contract
Advisor - answer The individual or companies that provide advise to group benefit plan sponsors. There are several different types: a Consultant, an Agent and a Broker.
Plan Member - answer The individuals who are eligible to be insured under the master contract. Coverage is the same for all individuals of a class. Plan members require a certificate of insurance upon becoming covered.
Dependent - answer Generally the spouse or children of a plan member
Benefit - answer the amount payable when a covered loss is incurred
Premium - answer the determined amount that the policy holder must pay for a set amount of insurance coverage
Master Application - answer request for group coverage that provides details required to put the plan into effect
Group Contract/ Master Contract/ Policy - answer The legally binding document outlining the insurance arrangement between an insurer and the group contract holder. Governs the group and is signed and sponsored by the policyholder not the individuals. Lays out: benefit coverage, insuring provisions, benefit provisions, general provisions
Unilateral Contract - answer the insurer continues to pay claims as long as the plan sponsor makes premium payments
Group Policyholder - answer the plan sponsor organization that enters into the group
insurance contract. The policyholder signs the master contract, determines coverage and levels, administers the plan and remits premiums
Benefit Plan Management - answer consists of plan design, plan funding and plan administration
Single-Employer Plan - answer where plan members are employees who work for one employer (who is the plan sponsor)
Multi-Employer Plan (MEP) - answer where plan members work for many companies
and are typically members of a union ( typically structured as a benefits trust)
Association Plan - answer the plan sponsor is an association
Creditor Plan - answer plan members are borrowers of the creditor (who is the plan sponsor) Funding Sources - answer relates to the amount of $$ available to the plan to provide benefits to plan members and cover the costs of administration
Funding Arrangements - answer relates to who assumes the financial liability for paying claims and expenses - basic decision is to insure or self-insure
Underwriting - answer assessment of risk for the purpose of pricing group insurance - determines the cost of expected claims plus admin. charges - this is how premium rates are set
MEP Trust Fund - answer created to receive contributions from participating employers and to pay benefits to members and/or to pay insurance premiums on their behalf
MEP Trust Agreement - answer establishes the terms and conditions for the overall trust management and empowers the trustees to make decisions related to the trust operations - outlines finances and how $$ is managed)
MEP Participation Agreement - answer Used for employers not bound by the collective agreement (or when a collective agreement doesn't specific contributions) - it outlines the employers obligations including procedures for reporting eligible members, making contributions and provides interest & penalties it the employer is delinquent
Insurance Solvency - answer the financial soundness of an insurance company - largely regulated by the federal government as most insurance companies are incorporated federally
Insurer's Market Conduct - answer regulation of this is the responsibility of provinces and territories
Minimum Continuing Capital and Surplus Requirements (MCCSR) - answer the minimum amount of capital an insurer is required to hold takes into account that the actual payout may differ from the expected payout. Insurers must maintain 150% of all possible claim payout
Legal Contracts - answer group insurances policies are legal contracts and therefore
subjected to contract law - it indicates the rights and obligations of all parties
Agent of Record - answer the individual/company authorized to represent an insured in the purchase, servicing and maintenance of insurance coverage with a designed insurer
Employee's Income - answer the remuneration paid to an employee over the course of a tax year as money or the equivalent arising from the employment of the employee
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