Carrier Philosophies: Why Quotes Vary So Much Between Stop-Loss Carriers

# Carrier Philosophies: Why Quotes Vary So Much Between Stop-Loss Carriers

Ever wonder why two carriers with access to identical data produce quotes that differ by 20% or more? The answer lies in **carrier underwriting philosophy**—and understanding these differences is a powerful tool for brokers.

## Manual-Heavy vs. Experience-Heavy Carriers

Each carrier has its own approach to blending manual rates with experience:

### Manual-Heavy Carriers
- Rely more on population-level assumptions
- Less weight on actual claims history
- **Best for**: Groups with poor or volatile claims experience
- Premium stability, but may not reward good performers

### Experience-Heavy Carriers
- Give significant weight to historical performance
- Reward groups that have run well
- **Best for**: Groups with strong, stable claims history
- More competitive pricing for good risks

## Why Philosophies Differ

Carrier approaches vary based on several factors:

### Portfolio Strategy
Some carriers pursue growth and will stretch to the floor (minimum percent-to-manual). Others tighten during periods of adverse portfolio results or inflation ([Milliman Medical Index, 2023](https://www.milliman.com/en/insight/2023-milliman-medical-index)).

### Risk Appetite
Some carriers prioritize predictability and loss ratio targets. Others accept more variability for competitive positioning and market share.

### Market Conditions
Competitive pressure, renewal persistency goals, and internal profitability targets influence how aggressively a carrier applies experience credibility.

## Real-World Impact: Favorable Experience

| Carrier | Philosophy | Manual | Experience | Quote |
|---------|-----------|--------|------------|-------|
| Carrier A | 75% manual / 25% experience | $100 | $60 | **$90 PEPM** |
| Carrier B | 25% manual / 75% experience | $100 | $60 | **$70 PEPM** |

That **$20 PEPM difference** translates to tens of thousands of dollars annually for a mid-sized group.

## Real-World Impact: Adverse Experience

| Carrier | Philosophy | Manual | Experience | Quote |
|---------|-----------|--------|------------|-------|
| Carrier C | 80% manual / 20% experience | $100 | $130 | **$106 PEPM** |
| Carrier D | 30% manual / 70% experience | $100 | $130 | **$121 PEPM** |

When experience is adverse, the manual-heavy carrier offers significantly better pricing.

## Strategic Implications for Brokers

**Carrier philosophy matters.** Brokers who understand these differences can:

- Match carrier approach to group risk profile
- Market favorable experience to experience-heavy carriers
- Protect adverse groups with manual-heavy carriers
- Maximize competitiveness through strategic carrier selection
- Minimize renewal surprises

## The Bottom Line

Don't assume all carriers will view your group the same way. Understanding carrier philosophies transforms stop-loss marketing from a numbers game into a strategic exercise.

*This article is part of our series on stop-loss underwriting. For a comprehensive overview, see our whitepaper: [Stop Loss Underwriting: A Deep Dive](/resources/whitepapers/stop-loss-underwriting-deep-dive).*