“You can’t have your cake and eat it”
— an English axiom
Exactly two years ago, the Ghana Insurers Association (GIA) organized its 3rd Life Insurance Conference as part of the Insurance Awareness month. The essence of the month-long celebration was to educate the insuring public about the need for insurance in general and life insurance in particular with the focus being on group life insurance.
Many seasoned speakers at the Conference, both local and abroad, shared their experiences and discussed the socio-economic impact of group life insurance, as a precursor to the efforts by the national regulator, the National Insurance Commission (NIC) and the trade body to make group life insurance compulsory in Ghana. A lot of breath-taking views were shared; signaling that the time was more than ripe for the full take-off of a compulsory Group life scheme in Ghana. With the many inadequacies of Workmen’s Compensation Insurance, I am positive that most employers
The role of group life insurance
Group Life insurance is playing an effective employee-management role in organizations across the world. This is especially so with employee benefit plans, where an employer provides a form of life insurance, often as an additional benefit to employees’ salaries and wages. The most obvious difference between individual and group life insurance is that the latter covers a number of people under a single policy while the individual life policy deals with only the individual as the name suggests. Typically, the main parties involved in Group Life Insurance policy are the insurer and the group policyholder, usually the employer (or club or an association or even Government). The individuals covered under the group policy are often referred to as group insured or group life insured or persons insured. The most common form of group life insurance is group term life. This is typically provided to the employees by the employer in the form of a yearly renewable term insurance policy. When the policy is due for renewa
l, both the insurer and the employer can determine whether or not to vary the terms of the contract, based on such factors as claims ratio.
How do group policies work
Most standard group life policies provide cover for an employee or a member of a group, but in some cases, extended to cover immediate family members against the risk of death and disability, with benefits often ranging between 1 and 6 times an employee’s annual salary. Similarly, an agreed lump sum will be paid to an insured or his / her nominated beneficiary in the event of temporary and / or permanent disability. Most group life policies provide detailed cover to employees’ human parts; thus, indicating the benefits payable in the event that an employee dies or loses a limb, leg, arm, eye, nose, ear, speech, hearing, etc.
Most group life policies have convertible clauses in them. Thus, when an employee leaves the job or retires, s/he may be allowed the opportunity, within a specified period and without proof of insurability, to convert the group policy into an individual one and pay the relevant premium except that the premiums become higher the moment it becomes an individual policy.
Relevance to the employers
Managing cash flow is one of the major challenges that organisations across the globe face in a competitive landscape; hence it becomes a burden for an organization to pay out huge benefits from its reserves when an employee dies or becomes disabled during his / her period of stewardship in the organisation. With the group life cover, that burden of benefits payment is taken away from the employer thereby, allowing the employer to focus on the core mandate, without recourse to being saddled with claims from employees. The group life scheme is therefore responsible for paying the agreed benefit to either the employee or his/her nominated beneficiary. Mostly, group schemes do not require medical underwriting, however, where it is required, a ceiling is given in order to allow premium loading.
In terms of affordability, group insurance premiums are relatively cheaper compared to premium for individual policies.
The way forward
The existence of welfare schemes is an important yardstick for measuring organizational reputation if passed into law. It is one sure means by which organizations can boost employee commitment and morale, which could spur them into willingly contributing their discretionary energies, beyond the norm, towards the success of the organization.
Not only will employees feel protected by a Group life insurance, but most importantly, they will feel a sense of security and protection for their families.
The National Insurance Commission (NIC) together with the GIA must continue to intensify the public education about group life insurance in order that all stakeholders will get along with it. As is the case in Nigeria and a few other African countries, it has become very necessary for a legislation to make it compulsory for all employers to provide a comprehensive group Life insurance package for their staff as soon as possible. This will not only make corporate employees more productive, but their organisations will also be seen as good corporate citizens. — GB
Until Next Week,
“This is Insurance from
the eyes of my mind.”