Recently we have had a number of instances in which the issue of compulsory membership on group schemes has come into question, both at quote stage and unfortunately even later.
The principle of compulsory membership exists in order to mitigate the risk of anti-selection against the insurer and it requires that the qualification criteria for membership (to a scheme or category) is defined. If an individual meets the qualification criteria then they have to join (the scheme or category) and if they don’t then they can’t. This removes the ability for individuals to choose to join or to change their benefits and, therefore, fulfils the intended purpose.
The terms and conditions of each of our insurers makes reference to this principle and it is very important that the qualification criteria of categories (through the category definition asked for when we quote) is provided, and the principle and reasons for it are explained to employers.
The exception to this is a core and flex benefit structure, which still requires compulsory membership, but allows a level of flexibility for members. The details of this will be covered in our next issue of the TSA Connect.
Yours sincerely,
The TSA Team
You’ll find all back issues of TSA Connect by visiting our blog.
All information provided is intended to inform and explain, but please remember to always check the current terms on policies when considering options and advising clients.
(Vol 8 Issue 11)
