There is a risk that either the insurance costs will suddenly increase or the service provider will stop them
There is a risk that either the insurance costs will suddenly increase or the service provider will stop them
Go online, we’re told. Automate your investments, premium payments, bill payments. Life is easier and things get done. Until they don’t.
We have seen some of the problems that group insurance policies are prone to in previous columns of the cover note. Typical cases were banks that offered group health insurance to their account holders and then decided to discontinue this activity. Or they’ve undergone a merger and the priorities at their corporate headquarters have changed.
Variations on this model are group policies offered by other commercial entities or institutions, including clubs and associations to which you belong. They can be accident, life or annuity insurance and are offered to you because you are a thrift account holder, credit card holder, retiree, alumni association member, entertainment club member, etc.
From an insurance perspective, there is no restriction on group policies, except that the group should not be formed for the purpose of purchasing insurance.
Group Policy has significant benefits. Signing up for them is easy. The deals are already negotiated and there are simple choices to choose from. Extensions are just as easy. There is comfort in numbers and you can know other members personally depending on the nature of the group. There’s an interface for claims in the form of the group policy admin, and they talk to the TPA to get your things done.
The premium tariffs are significantly cheaper.
One-size-fits-all approach
Coming to the downsides, the guidelines are one size fits all. However, they are highly recommended if you cannot or do not want to buy a custom cover.
But otherwise, you’re missing out on potentially better coverage that better suits your specific situation and needs. As seen above there is a risk that the service provider will stop providing this service and this has left some uncovered and unable to purchase insurance to continue.
This is particularly affecting the elderly population and their health insurance as insurers make more cautious underwriting decisions when it comes to covering this segment.
The other shock group policyholders experience in such situations is a sudden increase in their insurance costs. Premium rates for group policies versus individual policies are a factor; The other is that individuals are now older and attract higher slab rates.
Add to that the fact that health and life insurance rates are seeing significant premium increases due to COVID claims costs for insurers and healthcare cost inflation. That being said, there are administrative and logistical pitfalls to watch out for. One of them surfaced in a conversation with a family friend.
The lady had retired as a bank clerk and had opted for group health insurance through her pensioners association. Renewal terms and rates were exchanged and the governing association asked for a standing order to debit the premium on the due date. She sent an email authorizing the charge and this was duly confirmed. Having done what was needed, she went back to what retirees do, and rightly so.
However, the debit did not take place, nor did the extension. Since she was otherwise busy tracking her bank account, everything came to light when it was too late.
Now her policy won’t be renewed and there is a pause in coverage – both annoying situations. When she followed the matter up, her bank Pensioners Association/bank where she had a standing order (same bank, her previous employer) washed away responsibility for the non-payment and referred her to the competent body for disclaimers that emphasize that the duty of care was always hers.
The former is a service organization and the latter is backed to the hilt with technology designed to ensure such a failure can never happen!
The insurance company is not yet in the picture to say anything at all, as without a premium received, they are not legally at risk under the Insurance Act. This is not an isolated case. Solutions are not perfect and certainly not easy.
Logic and fair play suggest that the federation and the bank that follows it should be held responsible for restoring their coverage and settling their claims, if any, until that happens.
The member is reluctant to take a hard stand, but someone should start. Both the Pensioners’ Association and the Bank are paid services, so would that fall under the Consumer Protection Act? Or would a consumer court see bad faith in this disclaimer? Anyway, the only way to ensure your reward reaches its goal is to stand in line with cash and walk away with a signed, stamped receipt? These convenient disclaimers need to be scrutinized and discarded.
There is a clause in the insurance that states that the insured person must behave prudently when uninsured. That is, even if he has an insurance policy, he should take all measures to protect against losses as if he had no insurance. This underscores both harm reduction and good intentions.
Similarly, until there is some certainty that such gaps will not engulf your coverage, review this burden and ensure that your premium has indeed reached its intended target. Trust but check.
(The author is a business journalist specializing in insurance and corporate history)
