In this competitive age, insurance companies are trying their level best to secure the highest client base. As a result, they are trying to expand their operations involving different customer segments. Corporate clients are one such customer segment that insurance companies are targeting.
Meaning:
Life insurance companies cater to corporate clients by providing various benefits like term insurance, pension, gratuity, etc. They provide these in the form of group insurance schemes.
Group insurance schemes provide insurance to a group of people under one single master policy. Under the policy, the individuals who get insurance coverage are referred to as 'members' of the group insurance scheme.
Individuals who exit the organization to join any other organization may or may not continue to derive benefits of the group insurance scheme, depending on the terms and conditions of the scheme (We can't skip T&C here, I guess). The terms and the coverage can be re-negotiated at the time of renewal.
The amount of insurance coverage for each employee depends upon certain criteria such as:
Employee grade/designation
The salary drawn by the individual
Duration of employment, etc.
Group insurance can be terminated either by the insurance company or the employer at the end of any year. Apart from the group insurance provided by the employer, personal insurance can also be taken by the employees on their own.
As many people are covered under one single contract, the administrative costs are low because the coverage is not at the choice of the individual concerned; the chance of an adverse selection is low.
Main Feature:
Master Policy: A single policy is known as master policy, as a group is considered a single unit. It is issued to the authorised person of the group who pays the premium. The individual, who are the beneficiaries, are not parties to the contract.
Certificate of Insurance: The employees who get covered under group insurance (beneficiaries) are issued a certificate of insurance. Individual members are not separately evaluated on risk factors. Instead, underwriting is based on an assessment of the group as a whole.
Criteria: Beneficiaries are added to a group based on minimum requirement criteria. Examples of the requirements could be "actively at work" and "no medical leave for last 6 months". The definition of the criteria could differ from one group to another. Everybody fulfilling the criteria will have to join the group compulsorily.
Free cover limit: To reduce administrative expenses, insurance companies try to simplify the whole process of managing group insurance based on the pre-criteria mentioned above. For this, they stipulate a certain maximum amount, up to which medical check-up of employees will not be required. This amount is known as free cover limit or no evidence limit (as no medical evidence is generally called for)
Premiums: The premium payment in a group insurance policy is annual. It is mostly paid by the employer (non-contributory insurance plan). However, in some schemes, the employee and employer together can make the contribution (contributory insurance plan).
Until the next read, you know the drill...
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