Group insurance

Group insurance is an insurance that covers a defined group of people, for example the members of a society or professional association, or the employees of a particular employer. 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 the wish to buy insurance, which might be because they are a worse than average risk. Grouping individuals together allows insurance companies to give lower rates to companies, "Providing large volume of business to insurance companies gives us greater bargaining power for clients, resulting to cheaper group rates."

Group insurance may offer life insurance, health insurance, and/or some other types of personal insurance.

Investopedia defines Group Life Insurance as "Life insurance offered by an employer or large-scale entity (i.e. association or labor organization) to its workers or members. Group life insurance is typically offered as a piece of a larger employer or membership benefit package. By purchasing coverage through a provider on a 'wholesale' basis for its members, the coverage costs each individual worker/member much less than if they had to purchase an individual policy. People who elect coverage through the group policy receive a 'certificate of credible coverage' which will be necessary to provide to a subsequent insurance company in the event that the individual leaves the company or organization and terminates their coverage." (Source:Investopedia)

Thus we can infer the following characteristics of Group Life Insurance, which also apply to other group insurances:

a. there must be a group of people to be insured who have something in common other than the purpose of obtaining insurance

b. to save administrative costs, there is often a Master Policy Holder who will retain the documentation on behalf of the members, and may deal with the members on behalf of the insurer

c. Such covers are typically available at a discount to the respective individual rates, as administration and expected claims costs are lower.

Insurable Groups can broadly be classified as mainly two types - " employer - employee " groups where all members work for the employer proposing to cover them or "affinity" groups, whose members have a commonality other than employment - say deposit holders of a bank.

The Master Policy Holder of a Group Life Insurance Plan in the case of an "Employer Employee Group" is basically the Employer and for other groups would be the entity that has an insurable interest in the lives of its members. So in the case of a bank it could be said to have an insurable interest in the lives of its members who hold a deposit or have taken a loan. The Master Policy Holder also ensures each member gets their certificate of coverage stating the details of the premium paid, cover available, term of the cover and the claims process

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Wikipedia