Group Insurance Schemes can be one of the best employee benefits that an organization can provide to its employees. These policies enable the employer to fulfill the individual’s personal requirements by providing him the financial security after retirement and in special cases like accidents, physical injury, or bad health condition. The benefits of the Group Insurance Policies extend to the family of the employees. Thus, forming a good reputation of the company in public view. Also, these schemes have tax benefits for organizations as the premium paid and the expenses availed under these policies are considered as a business expense under the Income Tax Act.
However, even though there are a lot of advantages of these schemes both to the employer and to the employee; the employer needs to be aware of the huge responsibility he takes up while offering any kind of Group insurance schemes.
Factors to Account for the Group Insurance Policies
- The Procedure
- Unlike an individual policy, in the case of a group insurance scheme, the master policy is issued to the employer.
- This means that the insurance company enters the contract with the organization rather than the individual employees.
- The employees have issued a certificate of participation making them aware of the features and exclusions of the policy availed by the employer.
- Exclusive Responsibility of the Employer
- The organization is entirely responsible for fulfilling the requirements for the policy to continue without any break. The employee is not responsible for paying the premium or managing the policy.
- The employer must keep track of the renewal date of the policy, pay the premium amount on time and deduct the amount from the paychecks of his employees if required.
- The Authenticity Check
- Before issuing the Group Insurance Policy, it will be checked by the insurer whether the issuance of insurance is incidental to the Group; i.e. the group must not be formed just to avail the insurance.
- The details of the company will be asked for, and the employer is responsible for giving the accurate information on time.
- Size of the Group
The size of the organization affects the sum assured and the premium of the policy. Larger the group, it is more beneficial for the insurer in comparison to a small group. Accordingly, the premium rates will also differ.
- Experience of the Insurer
- In an individual Policy, the individual is liable to get a medical check-up done in case he wants to avail a health insurance scheme, but, not in a group insurance.
- So, the insurer will decide the sum assured and the premium either based on his experience with similar groups or on the size of the group if it is larger.
- Process of Underwriting
- The underwriting in the case of a Group is drastically opposed to an individual policy in which the individual applies for it and takes a medical examination.
- In a Group Policy, the medical examination is not possible especially for the larger groups.
- So, the employer submits one application covering the entire group and the insurer decides based on the characteristics of the group.
- Stability of the Group
- The insurers look for a Group that is financially sound and stable (growing if possible) to avoid losing the clients.
- Also, those businesses that constantly change their respective insurance companies are not preferable to the insurers.
- They look for a steady and long-term relationship with any group to gain in their business.
- So, before availing a Group Insurance Scheme, one must thoroughly research which insurer to choose, so that you can continue with the same for a long time.
- Contributory Insurance Plans
- Most employers avail for policies that require them to pay the entire premium amount.
- But, they can also avail for schemes that are contributory. An employee is required to contribute to the premium of the contributory plans.
For example: In the case of a Group Health Insurance contributory scheme, if the family member of an employee falls ill, the employee is required to pay a part of the expenses himself.
- Probationary Period Clause
- Most Group Insurance Policies have a feature that they become applicable to an employee from the first day of his joining the company.
- However, the employer may have to bear the loss in such cases if the organization has a high rate of attrition. This is because he would have to pay the premium for those employees who only work for a couple of months and then leave the company.
- To avoid this loss, an employer can put in a probationary period clause while hiring the employee. This period may vary from 6 months to one year.
- Till the expiry of this period, the Group insurance scheme is not applicable to the employee.
- Claim Under Group Insurance
- Group policies have two kinds of claim mechanism for the employees. In some policies, they can claim directly from the insurer in the others the claim is processed through the employer.
- Group health policies do not require the intervention of employer for the claim, but group life insurance and personal accident policies will.
Read More: Types of Group Insurance Schemes Available for SMEs.
These are some of the key factors that govern the smooth functioning of the group insurance policy and the relationship of the organization with the employees as well as the insurer.
SecureNow is an online insurance advisor who can assist you in understanding, comparing and buying group policies for your organization. Additionally, SecureNow will also assist you in managing the policy and processing the claims if and when they arise.
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