Can an employer work directly with an insurance company?
The risk an insurance company assumes when it agrees to cover a particular group is the possibility that claims will exceed the expected level. It is the chance of financial loss inherent in the group. Insurance companies use it to determine whether they will underwrite an insurance policy on a particular group. The spread of risk is necessary not only because of the expected variations in a population’s health but also because some policyholders — particularly very small groups — purchase group insurance to cover certain individuals with known health problems. This is a more costly way to obtain coverage for those high-risk individuals, but often the only way possible, given the evidence-of-insurability requirement for individual policies.
It is possible for an employer to deal directly with an insurer through a group sales representative to purchase group insurance. Premium rates and underwriting practices vary considerably from one insurer to another, however. In addition, the coverages provided are rarely identical. This means that comparison shopping is often beyond the capability of all but the most sophisticated purchases, for example, the very large company that has sufficient internal employee benefits expertise to do so. For this reason, many group insurance purchasers do not deal directly with insurance company underwriters or group insurance representatives, preferring instead to deal with an intermediary. Smaller employers need a qualified professional to act as intermediary because they lack the resources and expertise to handle their group insurance needs. An intermediary can help them define their needs and objectives, design a plan to meet those criteria, select the proper purchasing and funding vehicle,
