Target (or Break-Even) Loss Ratio
The percentage of your group’s premiums that is deemed sufficient to cover your claims. Rate increases or decreases are based, in part, on the degree to which your claims exceed or fall below the target loss ratio.
The predicted dollar value of your group’s claims. Rate increases or decreases are based, in part, on the degree to which your actual claims exceed for fall below the target claims. Note: target claims are calculated as premium times target loss ratio.
Third-party Administrator (TPA)
The party to an employee benefit plan that may collect premiums, pay claims, and/or provide administrative services. Usually, the TP A is an off-site professional firm.
Underwriters use this term to refer to group insurance that has been in force with another carrier. The home office is vitally interested in knowing why such business did not renew with the prior carrier.
The factor used to project the increasing cost of providing benefits.
Trended Loss Ratio
Is calculated by multiplying the incurred loss ratio by the trend factor in the current year. Previous years you have to double (year 2) / triple (year 3) the trend factor. Basically they are trying to show trend in today’s dollars for previous years. This is what is presented graphically on our renewals for the trended loss ratio.
When group insurance is contracted through a third party such as an association, a trust instrument establishes the basis for dealing with the carrier and with the component units. Each unit must become a signatory in the final agreement.