Relevant information in group insurance proposal
When discussing insurance, a proposal is a request to provide insurance or in other words, the form that you fill when you want to buy insurance.
What then is relevant information in the context of an insurance proposal? This refers to the facts and information that the insurance provider seeks, to evaluate the risk involved in providing an individual or group with insurance cover.
In the case of insurance, the principle of ‘utmost good faith’ is followed. This means that you must reveal all the information that can affect your wellbeing. This is because only you, the proposer, have all the information about the person or property to be insured.
Relevant information for group insurance
Let’s say you are an employer seeking to buy health insurance for your group. The insurance provider would consider the following information relevant for a group insurance proposal:
- number of employees to be covered
- nature of business
- nature of activities of employees
- location of employees
- age of employees
- any previous or existing group insurance cover for employees
- claims from the previous year’s group health insurance
- any historical incident that demonstrates the kind of risk the employees face
- income levels of the employees (important for group term, personal accident, health covers).
Effect of relevant information on premiums
Relevant information helps calculate risk, which, in turn, determines premiums. So, a higher number of employees would mean the risk is distributed over a larger group, thus reducing the per-life premium. Similarly, a younger employee group will attract lower premiums owing to lower health risks. However, high-risk businesses like aviation or high-risk employment activities like mining will mean higher premiums. Location does not usually affect risk unless high altitudes or the like come into play, increasing the risk of injury.
Information about previous group insurance helps the insurer determine claim history better, which will also help ascertain risk. In the case of term and personal accident cover, insurers need this information to determine whether the group is insured beyond their financial capacity. The maximum life cover allowed for an individual is 20 times their annual income. This is also why the income levels of employees would be important.
Of course, providing incorrect or incomplete information could give the insurer the right to reject the claim. On the other hand, accurate and complete information will allow the insurer to calculate risk properly and clear claims without hassles.
Check More: How does Group Insurance Cover work?
Case study: relevant information in group personal accident cover
Ram is the director of an e-commerce company. He decided to buy a group personal accident cover for the company’s goods delivery workers.
While buying the policy, Ram mentioned that his workforce was in Delhi, although the company has employees in three cities including Delhi. He also did not mention that these employees have to travel daily and spend extended hours on the road, delivering goods. His aim was to get a cheaper premium for the policy.
Jatin, an employee of the company, met with an accident on his way to a delivery in a remote area of Punjab. A delay in hospitalisation cost Jatin his life. The insurer rejected the company’s claim as the risk category of the covered employees was different from that mentioned in the proposal form.
At the time of renewal, the insurer suggested that Ram submit the proposal again with all the relevant information or that he submit separate proposals for different risk categories. This would ensure that employees or their families would not suffer due to the employer’s mistake.