Why do ancillary carriers need more information than medical carriers in order to provide a proposal in the small group market?

The short answer is that medical carriers, in accordance with the law (AB1083/AB1672), are permitted to set rates for small group members based on only two factors, age and employer location, while ancillary carriers are not constrained by these laws and can rate small group members on many different factors. These factors can include:

• Member age
• Member location
• Employer location
• Nature of business or SIC
• Employer contribution
• Current rates and benefits
• Claims experience
• Salary (for certain lines such as disability)

It is possible to limit the amount of information provided to an ancillary carrier by considering an “off the shelf” product such as Reliance Standard’s SmartChoice dental plans, in which case you’ll only need to provide a few data points, however, if your client wants any customization the carrier will likely ask for more information.

Ancillary carriers have good reason for requesting more data. Less data about a group and its members leads to greater uncertainty, which translates into higher cost and at a certain point, a refusal to provide a proposal. However, the more a carrier knows about a group and its members, the tighter their underwriting department can set rates in the proposal and the less likely those rates are to change once the carrier receives all applications and documentation.

The bottom line regarding ancillary proposals: more information means more competitive and better quality proposals and a much lower chance of unpleasant surprises.