It is more beneficial and certainly cheaper than individual cover, though there are some drawbacks as well. MM Bureau throws light on the subject

Group insurance schemes are steadily gaining popularity in India with many insurance companies coming up with new products. While the most common form of group insurance is the one offered by employers to the employees, there are various organizations such as banks, housing society, healthcare companies and financial services companies which offer group cover to their customers. In both cases, however, organizations tie up with insurance companies to provide the cover.

Group insurance schemes are mainly of three types—group life insurance, group credit protection plans and group health cover. As per Insurance Regulatory Development Authority’s (Irda’s) group insurance guidelines, a group can be an employer-employee group or a non-employer-employee group. For example, holders of the same credit card, savings bank accountholders of a bank, or members of the a social or cultural association are defined as a group (see box for more).

There are various group plans available. One of them is Kotak Complete Cover Grouplan which provides life cover to a group of borrowers of credit institutions (banks, retail finance providers, etc.). In the event of unfortunate demise, the bank gets the outstanding loan; this clears the liability of the heirs of the deceased. So, while the heirs gain financially, the bank gets its money back without any hassle. The country’s largest insurer, LIC, also has a number of group insurance schemes, some of which are Group Term Insurance Schemes, Group Critical Illness Rider and Group Mortgage Redemption Assurance Scheme.

Then there is Oriental Bank of Commerce’s (OBC) Oriental Bank Mediclaim policy, meant exclusively for the bank’s accountholders. It’s a family floater scheme covering four family members where no premedical examination is required. The scheme, participation in which is voluntary, offers cashless facility available at network hospitals. Other group insurance schemes include Bharti-Axa’a Mortgage Credit Shield and Life Premier Protect Home Shield.

But how beneficial such group insurance plans are? Does it make sense to go for such cover?

Benefits at low cost

One of the greatest advantages of group insurance is that it offers each member benefits at a very low costs; the discount over premium could go up to 30 per cent. Secondly, the policy can be tailor-made to suit the requirement of the group. However, there are a few factors you should remember if you’re opting for group insurance.

As Sanjay Matai, promoter and owner of The Wealth Architects, Pune points out, “The most important point to consider is the average age of the people covered under the particular group plan and you should ideally fall in the same age-bracket. Further, the usual things like exclusions, policy regarding preexisting illnesses and hospital network need to considered.”

Experts also say that even when a person is enjoying group medical cover from his employer, it is always suggested that he should buy one’s own cover also.

How to pick the best

There is little difference when it comes to picking individual insurance cover and group cover. In the case of health cover, for instance, a group plan also needs to be evaluated with respect to what is covered, exclusions, sub-limits, coverage of existing diseases, etc., just like an individual health plan.

Nevertheless, there are some areas where group insurance covers score over individual covers. In the case of health cover, the waiting period for inclusion of preexisting diseases is generally less than that in individual health cover. Similarly, maternity benefits are also more comprehensively covered in many group covers as compared to individual covers.  

There is another factor that makes group cover more attractive, i.e., health check-up. Most group covers do not ask for health check-up, though the persons buying the policy may be asked to give necessary declaration.

Harsh Vardhan Dawar, Director, Wealth Cafe Financial Advisors, Mumbai, says, “The advantage of a group plan is that it can be customized to suit the group. Some group plans cover preexisting diseases from day one. Some have a certain waiting period. The customizations can be discussed and finalized with the insurance company.”

Notwithstanding the benefits, group insurance covers do not come without any limitations. The most pressing issue is that individual members have no say over the amount of insurance cover.

The amount is applied uniformly to all members of the group. Experts, therefore, advise that an individual must first ensure that he has an individual plan and should not rely solely on the group plan. Secondly, the method of claim settlement may also differ according to the insurer. While some insurers provide cashless claims across network hospitals, some group covers may have deductibles and members are entitled to get reimbursement of expenses. So, check the terms and conditions and be sure about the claim settlement method of your group insurance policy.

Irda’s guidelines

As per the guidelines on group insurance policies issued by Irda in 2005, “A group should consist of persons who assemble together with a commonality of purpose or engaging in a common economic activity lime employees of a company. Non-employer-employee groups, like employee welfare associations, holders of credit cards issued by a specific company, customers of a particular business where insurance is offered as an add-on benefit, borrowers of a bank, professional associations or societies may also be treated as a group provided the president/secretary/manager/group organizer in his capacity as organizer of the group has an authority from majority of the members of the group to arrange insurance on their behalf or is doing so as part of a necessary security for other matters such as a bank on the life of borrowers.”

The guidelines further say that “no group should be formed with the main purpose of availing insurance. There should be a clearly evident relationship between the member and the group manager for services other than insurance. While a homogeneous group of persons may decide to buy a group insurance policy to achieve saving in cost, a person negotiating ‘group’ rates and then going round finding members to insure will not be considered as a legitimate group”.

“Insurance will cease as soon as a member leaves the group except where it is agreed in advance to continue the benefit even after the member leaves the group,” as per the guidelines.

The guidelines however do not say clearly regarding the size of the group. “While it is not proposed to prescribe the minimum size of a group through these guidelines, it is expected that insurers will exercise prudence in requiring a minimum group size. However, different criteria may apply to micro-insurance groups,” the guidelines say.