Sample interview questions: Can you explain your knowledge of different types of employee benefit funding mechanisms, such as captive insurance or reinsurance?
Sample answer:
Captive Insurance
- Definition: A self-insurance arrangement where an organization establishes its own insurance company to cover specific risks.
- Funding: Employers contribute premiums to the captive, which is used to pay for claims.
- Advantages:
- Reduced insurance costs
- Improved risk management
- Tax benefits
- Disadvantages:
- Requires a large number of insured employees
- Can be complex and time-consuming to establish
Reinsurance
- Definition: A risk transfer arrangement where an insurer (the original insurer) transfers a portion of its insurance risk to another insurer (the reinsurer).
- Funding: The original insurer pays a premium to the reinsurer.
- Advantages:
- Distributes risk across multiple insurers
- Improves financial stability
- Enhances coverage capacity
- Disadvantages:
- Can increase insurance costs
- May not fully protect against large losses
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Source: https://hireabo.com/job/1_1_44/HR%20Employee%20Benefits%20Analyst