Page 120 - Group Insurance and Retirement Benefit IC 83 E- Book

Associations and Miscellaneous Groups

Associations and other miscellaneous groups encompass nearly any other type of group

for whom insurance benefits are made available on a group basis. Types of eligible
groups in this classification vary according to state law. Typical examples are

professional associations such as the American Bar Association and the American
Medical Association, associations made up of people who are members of automobile

clubs, fraternities, sororities, and just about any other group with a common relationship

that is recognized by state law.

Creditor-Debtor Groups

Creditor-debtor group insurance is offered by a lender to people who borrow money. The
purpose of credit DI insurance is to protect the creditor to whom the policy's benefits are

paid if the debtor becomes disabled (or dies, in the case of credit life insurance) before

the debt is paid. Some credit coverage‘s are provided as individual policies, rather than
group policies.

What qualifies each of these entities for group insurance is the factor the members have

in common-their employer, their union or association, or their group status as debtors to a
particular financial institution. Some insurers also make group insurance available to

those whose common relationship is even more tenuous, such as people who hold a major

credit card through the same organization. Some of these less well defined groups are
solicited for group insurance through the mail or other direct advertising. Because people

so solicited essentially select themselves for coverage, rather than being qualified by an
insurance agent and underwriter, these groups tend to have a greater tendency toward

adverse selection-a preponderance of high-risk insured‘s who are most likely to have

claims.
Group Underwriting

Naturally, insurers want to avoid adverse selection by balancing the number of high-risk

insured‘s with low risk insured‘s. This is the essence of group underwriting. Most types
of group insurance have this balance built in since there is a large pool of people of

varying ages and health conditions who come and go and are being replaced in the group