Page 190 - Group Insurance and Retirement Benefit IC 83 E- Book

Chapter 11: Group schemes and Data Processing

'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.

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."

From the above paragraphs we can infer the following are the characteristics of Group
Life Insurance

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

b. there must be a Master Policy Holder who will retain the contract on the behalf of the
member and the carriers

c. Such covers are typically available at a discount to the respective individual rates.

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"