Break Even Analysis The analysis below compares how much Suzie Shoes would have been reimbursed at the various deductible levels using historical high claimant information and proposed annual premium. It is important to note that large claimants are very unpredictable and that prior years high claimant activity does not predict future high claim activity.
Voya
Current
Alternative 1
Alternative 2
Deductible Level
$175,000
$200,000
$225,000
$2,020,271
$1,718,706
Annual Premium
$2,452,692
$$ Premium Increase/(Decrease) to Change Pooling Level
($432,420)
($733,985)
-
# Claimants over Pooling Level to Breakeven
17.30
14.68
-
Historical Average Above Pooling Level*
4.33
4.33
5.00
What this means:
The premium difference between the $175k and 200k options is $432,420. Historically, the group has averaged $108,333 claims over 200k (4.33*$25,000 = $108,333). In order for the group to breakeven on the increased deductible level, Suzie Shoes could not exceed 17.30 claimants over the $200,000 deductible level (17.30*$25,000 = $432,420). Because the premium reduction of $432,420 is greater than the additional average claim liability of 108,333, Suzie Shoes would have to have at least 12-13 more claimants before they were taking more risk vs the premium reduction.
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