Group Insurance

Group insurance is an insurance that covers a group of people, usually who are the members of societies, employees of a common employer, or professionals in a common group. Group coverage can help reduce the problem of adverse selection by creating a pool of people eligible to purchase insurance who belong to the group for reasons other than for the purposes of obtaining insurance. In other words, people belong to the group not because they possess some high-risk factor which makes them more apt to purchase insurance (thus increasing adverse selection); instead they are in the group for reasons unrelated to insurance, such as all working for a particular employer.

Group Insurance can broadly be classified as " employer - employee " groups where all members working for a particular employer may be covered or non employer -employee or " affinity " groups, that comprise of members with a commonality other than employment - say deposit holders of a bank.

A feature which is sometimes common in group insurance is that the premium cost on an individual basis may not be individually risk-based. Instead it is the same amount for all the insured persons in the group. So, for example, in the United States, often all employees of an employer receiving health or life insurance coverage pay the same premium amount for the same coverage regardless of their age or other factors. In contrast, under private individual health or life insurance coverage in the U.S., different insured persons will pay different premium amounts for the same coverage based on their age, location, pre-existing conditions, etc.

Group policies are also attractive to consumers because the average price per policy is often lower. Carriers are interested in gaining customers and will cut prices a bit to accommodate members of group. Data shows that, for example, drivers save 29% on average by attaching themselves to a group policy..

The policy is issued in the name of the Master Policy Holder ( the employer in employer - employee groups) who will share the details of all employees on a regular basis with the insurer so that at any point in time only those in active employment are covered. The premium may be collected by the master policy holder and remitted one shot to the insurer or the master policy holder may decide to pay this themselves (frequent in India).

Therefore, a member of the group is generally eligible to purchase or renew coverage all whilst he or she is a member of the group subject to certain conditions. Again, using U.S. health coverage as an example, under group insurance a person will normally remain covered as long as he or she continues to work for a certain employer and pays the required insurance premiums, whereas under individual coverage, the insurance company often has the right to non-renew a person's individual health insurance policy when the policy is up for renewal, which it may do if the person's risk profile changes (though some states limit the insurance company's ability to non-renew after the person has been under individual coverage with a given company for a certain number of years).

In Canada group insurance is usually purchased through larger brokerage firms because brokers receive better rates than individual companies or unions. There may be slight differences in terms of administration and market related practices world wide, even though the concept may be the same. For example, In India, broker procured group term insurance, unlike Canada, does not intrinsically have any price advantage to the buyer i.e. the Master Policy Holder. In India, Group Term Life Insurance also employs a concept of Free Cover Limit or Non Medical Limit where individual members under a plan, can be exempt from individual underwriting if they are within such limits. Others may be subject to a medical questionnaire or a series of tests. It basically offers a cheaper premium on a basic life cover with less stringent underwriting requirements than individual life covers.

Group Health Insurance is also provided in India. It provides healthcare coverage to a group of people belonging to a common community (typically as employees of a company). These plans are generally uniform in nature, offering the same benefits to all employees or members of the group.

Most professionally run companies today provide Group Health Insurance as a part of their Employee Welfare program. Each company however gets the plan customized based on the employee demographics.