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Life Insurance - converting from flat rates to age/based salary rates

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Volcano13

Programmer
May 20, 2005
5
US
We currently have flat rates for Life insurance. Starting at $10,000 (employer paid), going up through $1million. We have 19 levels total. We also have peoplecode that restricts the employee to 7x their salary, rounding up), so if 7x their salary is $195,000, we would still let them pick the flat amount of $200,000.
We are now splitting employer paid from employee paid (optional Life). Setting up the employer paid is simple (new plan type, flat amount).
But we are switching the optional life that employees can buy to be age-based, and factor of salary. So for AE09, you can now pick 1x - 7x your salary. We will look at your salary and age as of a set date (e.g., say 10/1/08, since AE open mid-October).
If you currently have $200,000 of flat coverage ($190,000 you pay for b/c employer pays 10,000), and your salary is $52,000, then right now you have 190,000/52,000, or 3.65%. We are thinking we would need to default your 'new' coverage to 3x salary (so lower then your 'current'), but then you can pick 4x salary. But if you want 5x, 6x or 7x, you would need to complete a statement of health for the vendor (we already have a process for this).
So now we are trying to figure out the best way to convert employees from a flat rate structure to a salary based (and age-based) structure. Does anyone have any insight?

Thank you in advance!

Anna Hackett
anna_hackett@progressive.com



 
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