An insurance pool is a system in which insurance companies band together to form a "pool", to provide protection to insure against risk.
Rather than purchasing insurance individually, companies who offer employee benefit and risk management services 'share' or 'pool' funds to procure services and insurance as a group through traditional insurance providers, pools and cooperatives.
What are the pros and cons of an insurance pool?
With most traditional employee benefits offerings, the company contributes a monthly fee to the pool. In exchange, the benefits experienced by the company can include pricing stability and a range of coverage offerings.
Effectively, however, once the company's money goes into the pool, it is no longer an asset to the company.
How is a Third Party Administrator (TPA) employee benefits program different?
With a TPA, you contribute to your own 'trust' account, instead of contributing to a third party insurance pool. In very simple terms, it works like this:
At the end of each month, if your trust has not been 'used up', the balance carries forward, similar to a bank account.
With the funds you contribute Youngs-Ten Star does 3 things:
- Pays insurance premiums to protect against risk
- Processes and reimburses employee claims
- Pays administration fees, advisor compensation, and taxes.
At the end of each month, we provide a financial statement showing the funds contributed, funds paid out, and surplus or deficit status.