Important Points for IC 83 - Group Insurance and Retirement Benefit Schemes Exam
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The cover level of the converted policy is normally equivalent but can be lower than that of the group cover.
The conversion option is normally restricted to lives accepted at the group standard rates and may cease at a certain attained age.
Certain group insured lives may also be excluded from converting, such as individuals leaving to join the armed services or persons dismissed for fraud or misconduct.
The cost of a single conversion is equal to: Actuarial present value of the extra mortality cost Less Savings on underwriting and commissions.
Post the calculation of above cost, two approaches can be used: The insurer may estimate the number of lives, or amounts of insurance, that will convert and then, based on the estimated cost per 1000 of coverage amount, adjust the group premium to cover this cost or The insurer may charge the group a fixed amount per 1000 of converted cover for each conversion, possibly based at attained age. This approach is only practical when the group is subject to profit participation.
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