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Tuesday, September 01 2009 @ 12:01 AM GMT-6 |
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 Control the number and minimum size of groups an insurance company can have.
Insurance companies like to keep creating new groups. As the claim history for a group climbs they raise the rates based on that history. They then create a new group that the "healthier" policy holders of the old group can transfer to. Now the history of the old group is worse (raise the rates) and the new group is the low cost advertising leader.
There should be a formula where a company can only have so many groups depending on the size of the company. A really small company might only be able to have one group, a large one thousands.
The smallest group should be, say, at least 10,000 policy holders. If a group falls below the minimum the company has to either a) sign up new policy holders or b) transfer (at no additional cost) the policy holders to other groups. The transfer will require some sort of mechanism where the available policies don't reduce coverage for those transferred and they don't have to pay for coverage they didn't want in choosing their old policy/group.
More on transferring in a later post.
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