AN INSIGHT INTO GROUP INSURANCE IN INDIA
Abstract
The life insurance policy can be issued to individual as well as to groups. Group Insurance follows certain norms for issue of policies to a similar group of people. Under group insurance policy a large number of people are covered under a single policy. These types of policies are generally taken by companies for their employees or clubs for their members and so on. A group insurance policy can be taken by any group of people, big or small, that comes together for any reason, apart from that of specifically benefiting from an insurance scheme. A group policy extends to anyone irrespective of their age, gender, profession, social background and such factors. Group insurance is not limited to only employer-employee groups, but is extended to other homogenous groups too. The Group Insurance Schemes are intended to provide low cost life insurance and inculcate a habit of savings in the employees and provide insurance benefit to the family in case of untimely death.
Introduction
The tremendous growth of the economy and the consequential growth of the organized sectors lead the insurers to play a decisive role in designing various group insurance schemes. More over group insurance constitutes an important activity of insurance business. Group insurance is a contract of insurance with a company, or association covering a group of people who are engaged in the similar occupations. The group should be such that there would be continuous flow of new members while old members would retire. Individual members do not have to sign any papers and the benefit would be available uniformly to the entire group. The group insurance schemes offered by the insurance companies provide to certain classes of individuals at moderate cost. Group insurance is not only limited to employer-employee groups, but is extended to other homogenous groups too. For instance, in 2008, a school in Gujarat bought a life insurance policy for its students. This paper highlights the group insurance concept in detail.
Group Insurance
Group Life insurance is a form of Life Insurance that covers the lives of groups of persons such as some or all employees of a business, members of an association or a professional body (accountants, architects or lawyers) fewer than one single ‘Master Policy’.
The Group Insurance is based on the risk characteristics of the group as a whole without the intensive underwriting of each individual member. Group insurance is definitely more affordable than an individual insurance and is therefore recommended for large groups represented by any organization the most common being the employer-employee groups
It is a single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
Group insurance policies offer life insurance protection to all types of groups such as:
Types of Coverage for Group Insurance
A number of group insurance schemes have been designed for various groups. These include employer-employee groups, associations of professionals (such as doctors, lawyers, chartered accountants etc.), and members of cooperative banks, welfare funds, credit societies and weaker sections of society.
There are four basic types of coverage provided for Group Business:
- a) Employer-employee groups
- b) Professionals
- c) Cooperatives
- d) Weaker sections of society, etc
- Master or Group Policy
- Flow of insured’s:
- Affordability:
- There is a single policy contract that provides a cover to all members of the group who can change over a period of time. The coverage therefore is specific to the group and not the individual.
- The groups of people generally share an employer employee relationship.
- The owner of the insurance is the employer in most of the cases.
- The group insurance process allows non-restrictive movement of members.
- Group business typically offers cheaper coverage to the insured compared to individual insurance.
- It should be homogeneous by nature of occupation. Therefore members of a social club, a political party or religious establishment cannot constitute a group for insurance purpose.
- Insurance must be incidental i.e, the group must not be formed mainly for the purpose of obtaining insurance.
- The group must have a single central administrative machinery to act on behalf of all members.
- The group should be such that there is a steady stream of new entrants from year to year, so that the group is not stagnant
- Another important requirement is that a large proportion of the eligible members of the group should join the group scheme.
- A minimum size of the group is generally prescribed.
- Employer-Employee Group
- Creditor – Debtor group
- Professional group
- Other groups
Group Insurance | Individual Insurance |
The insurance contract is drawn in the name of the group | The insurance contract is drawn in the name of the Individual |
It is not possible to use the policy for availing loans, etc. | It can serve as an asset and allows to apply for loans, etc. |
The insurance coverage can be controlled and even cancelled by the provider. | It is discontinued only by the policy holder. |
A group policy cost is less expensive. | It is costlier |
Medical tests are not mandatory up to certain amount of cover. | Medical tests are compulsory before buying an individual insurance policy |
Premium deducted directly from salary. | Premium has to be paid individually, at stipulated times. |
- Life cover
- Pension cover
- Medical cover
- Disability cover
- Life Cover
- Death by accident.
- Permanent partial disability.
- Permanent total disability
- Dismemberment.
- Pension Cover
- Provident fund.
- Gratuity.
- Superannuation
- Medical cover
4. Disability Insurance
Group disability income protection provides for the partial replacement of earnings lost during disability caused by accident or sickness. Benefits are determined by the income earner’s normal rate of pay. It includesa) Short-Term Group Disability Insurance
Short-term group insurance provides weekly benefits for employees who are totally or partially disabled by a covered injury, illness, pregnancy or mental disorder. Typically short-term disability insurance is cost prohibitive to an individual. Therefore an individual would be better off signing up for the short-term disability insurance through their employer.b) Long-Term Group Disability Insurance
Long term disability insurance (also known as LTD) is defined as insurance with an elimination period of at least 90 days. The benefit period (time when benefits are paid after satisfying the elimination period) is typically 2 years, 5 years, 10 years, to age 65 or lifetime. Long term disability insurance is intended to cover more catastrophic types of claims that last a long period of time. Group Insurance Products The popular type of group insurance products are- Group Term Life Insurance
- Group Saving Linked Insurance
- Quasi-government bodies
- Public sector corporations
- Reputed public sector firms
- Reputed private sector companies which maintain accurate records and files of their employees
- Group Credit Life Insurance
- Group Dental Insurance
- Worldwide Travel Group Insurance
6. Disability Insurance
Group disability income protection provides for the partial replacement of earnings lost during disability caused by accident or sickness. Benefits are determined by the income earner’s normal rate of pay. There are basically two types of Term disability Insurance: Short Term Disability Insurance and Long Term Disability Insurance. Group Insurance Scheme Offered by the LIC The standard group insurance products generally offered by Life insurance companies are:- Single Premium Group Insurance
- New Group Leave Encashment Plan
- New Group Superannuation Cash Accumulation Plan
- New Group Gratuity Cash Accumulation Plan
- New One Year Renewable Group Term Assurance Plan I
- It ensures financial security for member’s family at very attractive rates.
- The Premium rates dependant on the size and risk profile of the group.
- In case of unfortunate death of a member, a lump sum (Sum Assured) shall be paid.
- New One Year Renewal Group Term Assurance Plan-II
About the Author
M.J. Senthil Kumar
Associate Professor, Department of Commerce (UG)
Sri Kaliswari College (Autonomous), Sivakasi 626130.
&
Dr.P. Sundara Pandian
Principal, VHNSN College (Autonomous), Virudhunagar
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