PROPERTY AND LIABILITY INSURANCE

The current status of property and liability insurance as an employee benefit is that, for several years, it has been offered by a few large employers. Detailed statistics from the insurance industry are difficult to obtain, but most estimates indicate that only a small percentage of personal property and liability insurance is provided as the result of an employer-arranged plan. This slow growth can be traced to several factors, namely, lack of favorable tax treatment, a low potential for cost savings, a lack of employer enthusiasm, and regulatory restrictions.

Most employer-provided property and liability insurance plans are not true group insurance but are payroll deduction plans of individual insurance. The cost of these plans is usually borne entirely by the participating employees. Besides handling the payroll deductions, the employer has little, if any, responsibility for plan administration. Employees are solicited by representatives of the insurance company, usually by mail or phone. Some insurance companies may actually have agents on or near the employer's premises, but most insurance companies give group members toll-free numbers to contact their representatives.

Payroll deduction property and liability insurance plans are usually not experience rated but are offered at a slight discount because of the administrative savings associated with mass marketing. Premiums for employees vary because they are based on the same factors as individual property and liability insurance (such as age, driving record, or value of the home), which also means that some employees may be ineligible for coverage. Most plans offer automobile insurance, and a few also offer other coverages such as homeowners' insurance and umbrella liability insurance. Employees usually have the same choices regarding the amount and type of coverage that they would have in the individual marketplace, and the contracts offered are usually identical. However, modifications that attempt to decrease the cost of the payroll deduction coverage are sometimes made. These include larger deductibles and provisions in the automobile insurance policy that eliminate coverage for medical expenses to the extent that they are paid under the employer's medical expense plan.

A few companies offer property and liability insurance on a true group basis and use both a master contract and experience rating for the group. All employees are usually eligible. The coverages offered to the employees are usually the same as those offered under payroll deduction plans, but the rating structure tends to be less refined, particularly for automobile insurance. Instead of having several dozen classifications that are based on factors such as age, sex, and driving record, there may only be three or four classifications based solely on driving record. In virtually all cases when true group property and liability plans are made available, the insurance company will insist on employer contributions of between 25 percent and 50 percent of the cost of the coverage and on participation by a large percentage of employees, possibly as high as 75 percent.