by Mr.Nirjhar
Majumdar, LIC
of India
Group insurance is
another way of buying life insurance, and at more favourable terms at times.
When we talk about
life insurance, we generally talk about the products sold to individuals.
The channel partners
here are interested in selling insurance by assessing the specific financial
needs of the individual. The primary focus is on helping the individual reach
his financial goals through a combination of various life insurance products.
Group insurance is another way of buying life insurance, and at more favourable
terms at times.
Here, the insurer
takes a whole group as the underwriting unit. The group can be an
employer-employee group, a group of professionals such as doctors, lawyers or
professors, or a group of people availing loan from micro-finance institutions.
The insurer is not bothered about the health and habits of the individual
members.
The insurer requires
a group of at least 20 people, actively working on the day of joining the
scheme. The members must have joined the group for purposes other than
obtaining a low-cost group insurance.
For employer-employee
groups, an employee should not be on leave on medical grounds on the date of
commencement of the scheme. In the beginning, at least 75 % of the existing
members must join the group, and the scheme must be made mandatory for all new members.
So, the insurer
expects to get a mix of lives whose average health condition is satisfactory.
There are some
special advantages of group schemes. Insurable interest needn’t be proved by
individual members here. Group insurance is ideal for those who do not have
much insurance individually because of advanced age, pre-existing diseases or
/ adverse family history. As
administrative expenses are quite low, group insurance premiums are also low.
The sum assured
depends on the group’s size and nature. In most cases, a uniform cover is given
to all members. Where various cadres of employees exist, graded covers are
provided. Again, insurance cover can be a multiple of the annual salary.
Insurance cover
The premium payable
by an employee can depend on his designation/basic pay.
There is a ‘free
cover limit’ in respect of every scheme — it is the sum assured up to which a
cover can be granted without any medical requirement. For some
employer-employee groups, the free cover can be as high as Rs. 50 lakh.
It is not just
‘insurance cover’ that is available under group insurance schemes. Most
insurers have group savings-linked insurance schemes that offer a cover as well
as savings opportunities. A portion of the premium is used to cover life risk
and the balance continues to earn interest. The contributions made by the
employer are considered business expenses while those by employees are eligible
for tax relief under Section 80C.
There are other
attractive group insurance schemes such as Group Gratuity Scheme, Group
Superannuation Scheme and Group Leave Encashment Scheme.
As there is an
insurance element in all these, the rights of employees are always protected,
and they don’t depend on the employer’s fortunes. Under all group plans, the
members can opt for riders such as critical illness, accident benefit and
permanent disablement. These are available at moderate costs. Another benefit
is that an individual member can ask for conversion to an individual policy.
The group insurance
business contributed 42 % of new business premiums for life insurers in
2012-13.
While there was
de-growth in conventional business in 2012-13, group insurance business
recorded growth of over 15 %. Insurers covered the lives of 6.57 crore people
in that period through group insurance schemes while they managed to sell 4.41
crore individual policies.
About the author
The writer Mr.
Nirjhar Majumdar is research associate, zonal training centre, Kolkata, LIC of
India. Views are personal
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