Group Business Operations in Insurance India

India’s insurance industry has already received Rs 10,000 crore when the FDI limit was raised from 26 % to 49 % in the year 2015. In India Insurance companies base their business models around presuming and diversifying risk. The crucial insurance model entails pooling risk from individual payers and redistributing it across a wider portfolio. Most insurance companies generate revenue in two forms; charging premiums in exchange for insurance coverage, and then reinvesting these premiums into other interest-generating assets.

Like all private sector businesses, insurance companies try to market efficiently and lessen administrative costs. Undoubtedly Insurance plays a fundamental role in the economy of any country. It shields the future earnings of individuals and companies, enables risk transfer and smoothens out the risk patterns, thus protecting the GDP of a country. Hence, measuring the premiums as a percentage of GDP and deciding the level of penetration is not appropriate since the premiums are fees to protect the GDP. Moderately, an appropriate measure would be required to see what proportion of the GDP the sums assured cover. 

What is Group life insurance?

  • Group insurance is an insurance that covers a group of people, for instance the members of a family, society, professional association, or the employees of a particular employer for the purpose of taking insurance.
  • Group Business Operations in Insurance allows insurance companies to give lower rates to companies, provides large volume of business to insurance companies and gives greater bargaining power to clients.
  • Group insurance offer life insurance, health insurance and also some other types of personal insurance.

Few Characteristics of group insurance

Group Business Operations in Insurance have the following unique characteristics, which also apply to other group insurances:

  • there must be a group of people to want to be insured and who have something in common other than obtaining insurance
  • there is often a Master Policy Holder who does the documentation on behalf of the members to save administrative costs
  • Such covers are usually available at a discount rather than individual rates, since administration and estimated claims costs are lower.

That way, in the completion of time, adequate penetration must be measured in the following manner :

  1. The total life insurance amounts assured must be around 5–10 times of the total incomes produced.
  2. The total assets and liabilities produced by the economy should be covered up to approximately 80 % to 90%.
  3. The density of insurance must be taken into consideration as to find out the average percentage of people that are above the poverty line who are covered.
  4. Finally the percentage of population covered by government and social schemes should be taken into consideration.

The mass accumulation of the above figures will provide an accurate assessment of insurance penetration. Although India may still feature among the low penetration economies, some surprises may be welcomed.

At last, merely adopting technology and automation of processes alone will not eliminate inefficiencies. New technology will give rise to new capabilities and processes must be redesigned accordingly so to reduce wastage and thereby delight customers.

A change in approach is the need of the hour whereby technology is viewed as a fundamental business tool rather than just an operational and process tool. The usual inhibition in a regulated industry can be bestowed with if organisations work with all stakeholders, including regulators and the government hand in hand. 

Groups eligible to buy group life insurance

Eligible groups for group Insurance are –

  • Employer-employee groups
  • Banks and their accountholders
  • Associations and their members
  • Trade unions and their members
  • Financial organizations and their customers
  • Government and the citizen of India

Advantages of group life insurance schemes

  • If the group is paying premiums for the group life insurance policy group members can gain free life insurance coverage.
  • The premium cost on an individual basis is not individually risk-based.
  • Group policies may be attractive to consumers because the average price per policy is usually lower.
  • Members who take up group insurance are normally eligible to renew coverage while they still continue to be members of the group, subject to definite conditions.
  • Under such group insurance plans a employee will remain covered provided that he or she continues to work for a certain employer and pays the necessary insurance premiums
  • It can be customized to offer benefits based on designation and profile of employees.
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