Many business owners in Canada have looked to new insurance carriers in order to reduce their premiums. Reducing costs wherever possible is usually a sound business strategy, but how many times have you seen a business owner get hit with a “first renewal” increase on their premiums? Perhaps you were enticed by better employee health benefits at a cheaper premium than you were currently paying?
So how are insurance carriers able to offer such competitive pricing in order to win your business? There are a few things you should know about the insurance industry in Canada:
- There are two different rates that you will receive from insurance carriers, the standard (also called Manual) and the introductory rate.
- Most of the major insurance carriers will have standard (manual) rates that are within 10% of each other. This is because their expenses are very similar as well.
- Insurers will establish a reserve with newer customers, the reserve is around 8-10% of your premiums. This reserve is designed to pay for claims after you leave the insurance provider. However, this reserve is not returned when you leave and becomes pure profit to the insurer. Your new insurer will need to establish the reserve at your first renewal, which explains part of the increase you see at this point.
- Inflation is taken into consideration at every renewal. This can range from 11%-15% for health and 6%-14% on dental plans. You will not see inflation considered in your initial quote, they are instead addressed at your first renewal.
Are you beginning to see a pattern? Insurance providers are willing to spend money to purchase your business, but in the end the plans are designed to recoup these initial costs through rate increases.
At the end of the day, your usage (plus administration fees and inflation) will determine your premiums. Providers will always try to present the lowest possible premiums (and the most benefits) in order to win your business.
If you truly want to streamline your employee health benefits and reduce costs, we recommend an in-depth review of your current plan. Followed by a comprehensive employee benefits strategy that addresses the actual needs of your business. Simply pitting insurance providers against each other will only benefit the industry, contact DENT Benefits today and make the insurance industry work for you.
The information in this material is derived from various sources. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.