11.3.3 Participating vs. Nonparticipating Policies
Group health insurance issued by mutual companies pay dividends, whereas stock companies issue experience-rated refunds. Experience-rated plans may make premium reductions retroactive for 12 months and may be contingent upon renewal of the master policy. The payment of dividends is usually not contingent upon renewal.
Dividend payments can never be guaranteed. There are two major factors used that determine whether dividends or refunds will be issued.
- Expenses
- Claims costs
If these items are less than anticipated, a dividend (or refund credit) is issued.
