Group Insurance Schemes in 2022: How does it benefit employees and employers?

Date : 25/08/2020
Read: 7 mins

Today, group insurance has become an essential part of the employee benefits package. Study this in detail to know how this works as a big incentive for employees.

Group Insurance Schemes: How does it benefit employees and employers?

Group health insurance has become an indispensable part of employee benefits. Organisations provide this to safeguard employees against unexpected health issues, accidents, mishaps, etc. It also plays a big role in motivating and incentivising employees. Most people look at wholesome benefits and not only the salary when taking up a job. This is why, companies that offer a group insurance scheme are often considered more appealing to applicants. Group insurance advantages are not limited to employees alone. They can also be valuable to the employer in more ways than one.

Before we dive into the history and significance of group insurance policies, let’s first understand it.

What is group insurance?

A group insurance scheme is essentially a health/medical insurance plan that covers all the members of a particular group, in this case, employees of an organisation. In a group insurance policy, members get insurance cover at a reduced cost as the provider’s risk is spread across a big number of policyholders. Most plans cover employees, their spouse, children and dependent parents.

Types of group insurance

A group insurance policy primarily covers two types of groups

Formal groups: These refer to the groups wherein an employer or group owner remains common for all members of the group. It can also be referred to as the employee-employer group, thus covering groups like companies, business organisations, professional organisations, etc. The employer purchases the policy in this type of group.
Informal groups: These refer to the groups wherein all members of the group do not have a common employer. It can also be referred to as the non-employee-employer group. It includes cultural associations, same credit card holders, and members of the same societies. The group administrator purchases the policy on behalf of the members.

The rise of Group Health Insurance

The concept of group insurance came about during the rise of the industrial revolution. The exponential growth of factories resulted in vast and massive machinery. And working on these machines caused several accidents and work-related injuries, ranging from disabilities to fatalities. This led to the need for social protection by those who had experienced occupational dangers and mishaps, eventually bringing about several changes.

The demand for furnishing various perquisites on a cost-efficient scale gave a fillip to group insurance policy.
Affordable and progressive underwriting norms, unlike those observed in individual insurance, led to the extraordinary development of the group insurance scheme.
Thus, people who were refused individual insurance were able to acquire insurance on a group basis.

As time passed, multiple group insurance schemes emerged that were established on a mix of advantages for the employee by the employer and state. Employees were offered benefits such as a lumpsum payout to family in case of premature demise while other benefits were paid on tenure with the employer. These benefits included regular health-checkup, cashless hospitalisation facilities, maternity benefits, covers critical illness with an extended plan, hospitalisation charges, etc. While group insurance, as a concept, developed and expanded in the West and in advanced nations, it experienced a belated take off in India.

Group Insurance in India

In the early years, the group insurance industry did not conform to wide benefits for employees. However, most changes became noticeable only after independence.

With the gradual realisation of the importance of group insurance and demands made by trade unions, a sharp growth in business was noticed. Group insurance policies have contributed greatly to society. Here are some group insurance advantages:

Group health insurance policies facilitate small-scale organisations, where workers might find difficult to buy individual insurance policies.
In an arena of compounding cost of living, organisations can avail of providing insurance facilities to employees at a lower cost.
Group insurance schemes for employees extend coverage to an unlimited of staff under the same agreement; this makes it convenient for all kinds of companies.
Currently, a large percentage of employers focuses on increasing the productiveness and team spirit of their employees. Group insurance, has thus, become quite convenient for these companies to offer healthcare coverage as a part of their employee benefits at a decreased price.

Group insurance schemes beneath the same umbrella offer a range of products for life, mishap and health insurance, which could assist employers to not only retain staff but boost their output as well.

What’s the difference between individual and group insurance?

What are key features of group health insurance policies?

It covers medical benefits not only for insured, but also for a spouse, children, and dependent parents.
It also covers pre-existing illness and maternity.
It offers cashless hospitalisation or direct settlement of bills.
It also covers other charges such as ambulance costs.
Some providers provide reimbursement of medical experts/practitioners for checkups.

The significance of a group insurance scheme:

Group insurance has transformed the scene of the entire insurance industry. Due to the variety of insurance products available, both employers and employees are benefitted, as it renders a component of confidence to workers and they are comforted that even if they face an illness, handicap, unemployment or untimely demise, it can be handled at a low cost.

What advantages do employees get?

Employees are the greatest beneficiaries of group insurance, and this has helped to enhance the scope of employee advantages exponentially.

Affordability: The primary advantage gained by an employee under group insurance is the affordable feature of the policy, as compared to an individual insurance scheme. Such a plan is more affordable due to a greater number of staff below the same insurance policy, which leads to a reduction in administrative expenditures.
Worker Benefit program: Group insurance is one of the most prominent employee benefit programs in countries outside India. A greater part of the labour force is sometimes incapable of acquiring an individual insurance policy for themselves or their partners/family due to the high cost. Thus, it relies exclusively on the employer to support employees' insurance policy.

As a fundamental employee benefit, group insurance schemes helps employers to boost their staff output, as well as their morale in a company. But the advantages do not end there; there is a lot for company owners to gain from offering their workforce with some level protection:

Retention: Many businesses offer their staff a group insurance scheme as a supplementary benefit. This not only enhances the employees' efficiency and morale, but it also raises the retention ratio among them.
Public Image: Employers can push their public appearance through group insurance systems and therefore, pull in potential candidates from the market.

Different types of group insurance and what they cover

Conclusion

Any organisation would know that productive and motivated employees can help keep a business successful and running. By offering a group insurance scheme for employees, a company can create a feeling of security among the staff and boost overall productivity. More importantly, group insurance policies are an indispensable part of the employee benefits package, that can offer financial benefits to employees as well as to employers at a minimal cost.