One client’s renewal. Results vary. Every plan is different, and no review can promise a number.
Every group plan has a renewal date, and a few weeks before it, a letter arrives. It gives you a percentage. Sometimes there is a page of explanation, sometimes there is a paragraph. Either way, the number is presented the way a tax bill is presented: as a fact that has already happened to you.
It isn’t one. A renewal is a price an insurer proposes. It is built out of assumptions, and assumptions can be examined.
That is not a claim that every increase is wrong. Plenty are right, and some are generous. But the difference between accepting a number and understanding it is usually worth more to an employer than anything else that happens in the benefits year.
What the insurer is actually adding up
Strip away the formatting and almost every renewal is the same five-step calculation.
Your claims. What your people actually used over the experience period, usually twelve months ending a few months before the renewal date. Health, dental, drugs, and vision are the lines that move.
A trend factor. An assumption about how much the same care will cost next year. Drug costs rise, fee guides change, utilisation drifts up. Every insurer applies a trend. The number they apply is a choice.
Credibility. How much your own experience is allowed to influence your price, against how much comes from the insurer’s wider book. A 300-life group is largely priced on itself. A 15-life group is largely priced on the pool, because fifteen people’s claims in one year are mostly luck.
Pooling. Large individual claims are usually charged to a shared pool rather than to you directly, and you pay a pooling charge for that protection. A well-designed pool is the reason one catastrophic claim doesn’t end your plan.
Retention. The insurer’s own share: administration, commissions, taxes and margin. It is typically expressed through a target loss ratio — the share of every premium dollar the insurer expects to pay out in claims. If the target is 76%, the other 24% is theirs.
Five inputs. The last three are where renewals quietly go sideways, because they are the least visible and the easiest to move.
The trend assumption does most of the damage
Of those five, trend is the one to look at first, because a single percentage compounds across your whole premium.
Assume costs will rise 9% and you get one renewal. Assume 15% and you get a very different one, from identical claims. Both can be defended in a meeting. Only one of them matches what the market has been doing.
So the useful question is never “why is it 19%?” The useful question is “what did you assume, and where does that assumption come from?” A renewal that assumes costs climbing far faster than the market norm is not wrong, exactly. It is a forecast, and you are allowed to ask why this forecast is higher than the industry’s.
Watch the insurer’s share, not just the total
Here is the part that rarely gets said out loud.
An increase can leave your claims exactly where they were and still change what the insurer keeps. If claims are flat and premium rises, the share of every dollar going to administration and margin goes up with it. The plan didn’t get more expensive to run. The price of it did.
That is why a renewal review that stops at the headline percentage misses the argument. The number worth looking at is what the insurer keeps before and after — last year, as paid, against the renewal as proposed. When that share moves several points on flat claims, you have a specific, factual question to ask, and it is a much better question than “can you do better?”
Why a quiet year doesn’t always lower your price
Employers with smaller groups often find this one counter-intuitive, and it is worth understanding before you go into a renewal meeting expecting a reward for a healthy year.
Below roughly 50 lives, your own claims carry limited weight. Much of your price comes from the insurer’s manual rates — the rate book for your industry, region, and demographic profile. You can have a genuinely quiet year and still see an increase, because the book moved, or because your average age did.
This isn’t unfair, and it isn’t a reason to switch carriers every year. It is a reason to know which kind of group you are. It changes what a good negotiation even looks like: for a large group, the argument is about your own experience. For a small one, the argument is usually about design, pooling level, and whether the market has a better rate book for your profile.
The lines nobody looks at
Health and dental get the attention because they are where the claims are. Meanwhile life, dependent life, AD&D and disability sit at the bottom of the statement, priced off demographics and rarely revisited.
They are also the easiest lines to compare across insurers, because the coverage is close to identical. It is not unusual to find real money there. It is also the place where switching needs the most care: disability coverage in particular carries protections for employees who are already unwell, and moving insurers can affect them. Cheaper is not automatically better, and sometimes the right advice is to leave a line exactly where it is.
The three questions to ask before you accept
- What trend did you assume, and why? Compare it to what the market has been running at, not just to last year’s letter.
- What did our claims actually do, and what share are you keeping? Flat claims with a rising retention share is a conversation, not a coincidence.
- How much of this price is us, and how much is the book? The answer tells you whether your renewal is an experience argument or a market argument.
Any insurer or advisor should be able to answer all three in plain language. If the answers arrive as a new PDF with the same total at the bottom, that tells you something too.
A second read, in a minute
We built software for this, because doing it by hand takes days that most renewals don’t have.
It reads the renewal and the experience report, rebuilds the insurer’s own arithmetic, and shows the gap between what is being asked and what the claims actually support — with every figure traceable back to the document it came from. Where the numbers justify the increase, it says so. That happens more often than you might expect, and knowing it is worth something too.
If you want an independent read
If your renewal is coming up in the next few months, the Fathom Check-up is an independent read on your plan and a forecast of your renewal: what your claims support, what the assumptions are doing to your price, and what is worth changing before you sign.
It doesn’t require changing brokers, and it doesn’t require a meeting to get started. Start an AI audit, or get in touch if you’d rather talk it through first.
Either way: read the letter as an opening offer, not a verdict.