In administering a group life insurance plan, which of the following is a typical responsibility of the employer as group policyholder?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
As the group policyholder, the employer is responsible for plan administration: selecting the eligible group in a nondiscriminatory manner, maintaining enrollment and payroll records, collecting employee premium contributions in a contributory plan, and managing the day-to-day administration. The insurer performs the underwriting and pricing functions, issues the master policy, and assumes the risk. The employer's administrative duties make the group plan workable at a low per-person cost, which is part of why group life insurance is less expensive than comparable individual coverage.
Why the other options are wrong
- B) Individual health underwriting of employees is the insurer’s function. In group insurance, the employer does not underwrite individual risks; the group is underwritten and coverage is offered to eligible classes.
- C) Guaranteeing insurer solvency is never an employer responsibility. Solvency protection comes from insurance regulation and the insurer’s own capital requirements.
- D) The insurer issues the master policy and sets the premium rates. The employer administers the plan as the group policyholder but does not perform the insurer’s pricing function.
Memory hook
Employer runs the group machine: pick the class, keep the books, collect the premiums. Insurer prices and pays.