Compulsory group life insurance: The way to go?

BY: Insurance Bakery & Mawuli Zogbenu
The Ghana Insurers Association (GIA)

The Ghana Insurers Association (GIA) recently organised the Insurance Awareness Month in Ghana as part of which there was the 3rd Life Insurance Conference.

The essence of the month-long celebration was to educate the public about the need for insurance in general and life insurance in particular.

 

Many speakers at the conference, both local and international, were invited to discuss the socio-economic impact of group life insurance as a precursor to the efforts by the national regulator and the trade body to make group life insurance compulsory in the country.

A lot of breath-taking views were shared; signalling 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, they were hopeful that most employers would welcome the idea of a compulsory group insurance scheme for their employees as a means of protecting their most valuable assets (employees).

The role of group life insurance

Group life insurance is playing an increasing role in organisations 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 insurances is that the latter covers a number of people under a single policy. 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). 

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 renewal, 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.

What does it cover?

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 one and six times an employee’s annual salary.

Similarly, an agreed lump sum may 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.

Convertibility

Most group life policies have convertible clauses in them. Thus, when an employee leaves the job or retires, he/she 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.

Relevance to the employer

Managing cash flow is one of the major challenges that organisations face in a competitive landscape; hence, it becomes a burden for an organisation to pay huge benefits from its reserves when an employee dies or becomes dismembered.

With the group life cover, that burden of claim 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.

Premium

In terms of affordability, group insurance premiums are relatively cheaper compared to premium for individual policies. Meanwhile, arrangements could be made with the insurer to stagger the premium payment into quarterly or half yearly to ensure smooth operation.

The existence of employees’ welfare schemes has become an important yardstick for measuring organisational reputation. Group life insurance is, indeed, one sure means by which organisations can boost employee commitment and morale, which could spur them into willingly contributing their discretionary energies beyond the norm towards the success of the organisation.

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, together with the Ghana Insurers Association 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.

This will not only make employees more productive, but their organisations will also be seen as a good corporate organisation.     

Until next week, “this is insurance from the eyes of my mind.”