Claim Fluctuation Reserve for Life and Disability

You're probably familiar with using claim fluctuation reserves (CFR) for group health insurance plans. But did you know a CFR can be used with almost any group insurance coverage, including STD, LTD and Life? For the right group, matched with the right carrier, a CFR can be a powerful tool for lowering the group's net cost in the long run.

A CFR is an interest-bearing account established for the mutual benefit of a policyholder and the carrier. It's typically used for accounts that are experience rated and the policyholder is able to participate in the experience by receiving a refund when the experience runs better than expected. The policyholder owns all funds deposited in the account.

The main advantage of a CFR over pooling coverages is long-term rate stabilization and the opportunity to build a long-term relationship with one carrier. For example, if a large group’s LTD experience is better than expected at renewal, a policyholder with pooled coverage might see a reduced renewal rate while the carrier keeps the difference between the premium and what is needed to pay claims expenses during the initial rate guarantee period. If the same policyholder has a refunding arrangement with a CFR, the positive remainder is placed in the CFR account and may be used to help offset future adverse experience.

Once there are funds in the account, they may be used to stabilize rates by offsetting future pricing fluctuations, lowering risk charges and cutting retention costs

A refunding arrangement and CFR isn't for every policyholder, which is why consulting with your Sales Rep is always a good idea before recommending such an arrangement.

Standard Insurance Company offers a broader array of alternate funding options for Group Life and Disability plans than you might expect. Contact your Sales Rep to learn more about how alternate funding solutions from The Standard may be able to help you design more economical employee benefit plans for your customers.