Relevant information in any insurance policy refers to the facts and information related to the risk in question for the insurance plan.
In the case of insurance, the principle of “Utmost Good Faith” is followed, meaning the proposer must reveal all the information that can affect the wellbeing of the subject of the contract. This is because only the proposer has all the information about the risk, asset, or property to be insured.
The following information is considered relevant for a group insurance proposal:
- of employees (to be covered)
- Nature of Business
- Nature of Activities of Employees
- Location of the workers
- Age of Employees
- Any previous or existing group insurance employees are covered with
- Any other historical incident which indicates the kind of risk faced by employees or the members of the group in consideration
- Income levels of the employees (important for group term, personal accident, health covers)
Effect of Relevant Information on Premiums
- A Higher number of employees means the risk is distributed over a larger group thus reducing the premium.
- Nature of business can be categorized into different risk categories, for example, aviation is higher risk business than an aircraft manufacturing facility.
- Nature of activity of employees will also be categorized in different A miner will carry higher risk of injury or death than a clerk writing cheques to the minor.
- Location of workers also affects the risk category they can be put in. Though usually, this condition does not affect the risk, in conditions like workers employed at high altitude or mountains face far more risk of injury than those in the plains.
- People in different age groups have different mortality or injury Accordingly, the premium is affected in group insurance.
- Previous group insurance information only helps the insurer determine the risk and claim history better. Also, in the case of the term and personal accident, it’ll be needed to determine whether the group is insured beyond their financial capacity. g. maximum life cover allowed to an individual is 20 times his/her annual income.
- Income levels of employees are required for the similar purpose as mentioned in the previous point.
Check More: How does Group Insurance Cover work?
Benefits of Complete Disclosure of Relevant Information
- Insurers must avoid adverse risk selection to serve genuine claims
- Disclosing the relevant information time to time helps insurer judge the risk more accurately and decide premium accordingly
- Any relevant information which could affect the claim, not provided to insurer gives them the right to reject the claim
- Hassle free claim processing
Case on Relevant Information in Group Insurance
Ram is the Director of an e-commerce company. He decides to buy a group personal accident policy for the select base of employees. Only goods delivery workers are to be covered under the group policy term.
While buying the policy, Ram had mentioned that his workforce is located only in Delhi, whereas his employees are located in three cities including Delhi. He also avoids mentioning that these employees are supposed to travel on a daily basis and spend extended hours on the road, delivering goods. His aim was to get a cheaper rate for the policy.
Jatin, an employee of the company, meets with an accident on his way to delivery in the remote area of Punjab. Jatin was admitted to a hospital after 45 minutes of meeting with an accident. Due to the delay, Jatin passes away on his way to the hospital.
The claim, however, had been rejected by the insurer as the risk category of covered employees has been different than mentioned in the proposal form.
At the time of renewal, the insurer suggested that Ram should submit the proposal again with all the relevant information, or submit separate proposals for different risk categories.
This will ensure that employees or their families do not suffer due to employer’s mistake, despite being covered by insurance.
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