From the underwriting perspective, what type of turnover should a group have?

From the underwriting perspective, what type of turnover should a group have?

• A. High turnover with frequent entry and exit of various risk levels
• B. No turnover; stable membership
• C. Steady turnover: younger, lower-risk employees enter the group, and older, higher-risk employees leave
• D. Largely declining membership due to attrition

Answer: (C)

Turnover pattern affects the risk mix an insurer will see over time. The best scenario is steady turnover where younger, lower‑risk entrants continually replace older, higher‑risk members. This keeps the group’s average risk relatively stable and favorable, helping to predict claims more accurately and maintain pricing adequacy. When younger people join and older, higher‑risk individuals leave, the overall expected claims trend remains more predictable, reducing adverse selection and helping the insurer manage morbidity and cost trends. High turnover with entrants and exits at varying risk levels creates unpredictability in claims experience and can skew the risk mix in uncertain directions. No turnover lets the group age together, which tends to raise average risk and costs over time. Largely declining membership reduces the premium base and can compromise sustainability and underwriting assumptions.

Turnover pattern affects the risk mix an insurer will see over time. The best scenario is steady turnover where younger, lower‑risk entrants continually replace older, higher‑risk members. This keeps the group’s average risk relatively stable and favorable, helping to predict claims more accurately and maintain pricing adequacy. When younger people join and older, higher‑risk individuals leave, the overall expected claims trend remains more predictable, reducing adverse selection and helping the insurer manage morbidity and cost trends.

High turnover with entrants and exits at varying risk levels creates unpredictability in claims experience and can skew the risk mix in uncertain directions. No turnover lets the group age together, which tends to raise average risk and costs over time. Largely declining membership reduces the premium base and can compromise sustainability and underwriting assumptions.