CII R05 Group Insurance Schemes 2

Question 1

What is 'cascade benefit' in a group income protection scheme?

Accepted Answer

Where the cost of long-term claimants is spread (or 'cascaded') across the group scheme

Answer

A cascade (or pooling) arrangement means that the cost of expensive long-term claimants is shared across the whole group scheme rather than falling solely on one employer, making long-term claims more affordable.

Question 2

Under a group life assurance scheme, what happens when an employee leaves the employer?

Accepted Answer

The employee can convert the group policy to an individual policy within 31 days without evidence of health

Answer

Most group life schemes include a conversion option, allowing a departing employee to convert their group life cover to an individual policy within 31 days of leaving, without having to provide medical evidence of health.

Question 3

What is the Employer's Class 1 National Insurance implication of group death-in-service registered under a pension scheme?

Accepted Answer

Registered group life premiums are exempt from employer NIC as they are exempt from Class 1A

Answer

Premiums for group life assurance registered under a pension scheme are not treated as a benefit in kind for employees, so they are not subject to Class 1A NIC for the employer. They are a fully deductible business expense.

Question 4

What is the minimum level of employer contribution required under auto-enrolment (from April 2019 onwards)?

Accepted Answer

3% employer, 5% employee total

Answer

From April 2019, the minimum total contribution under auto-enrolment is 8% of qualifying earnings, with a minimum of 3% from the employer and 5% from the employee (including tax relief).

Question 5

A group income protection scheme is arranged on a 'self-insured' basis. What does this mean?

Accepted Answer

The employer meets the cost of claims themselves rather than transferring risk to an insurer

Answer

A self-insured (or self-funded) group scheme means the employer bears the financial risk of claims rather than transferring it to an insurer. Large employers sometimes do this to retain the savings if claims are low.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Group Insurance Schemes 2