HOW A NON-EMPLOYER-EMPLOYEE GROUP INSURANCE SCHEME WORKS

 

HOW A NON-EMPLOYER-EMPLOYEE GROUP 
INSURANCE SCHEME WORKS 

  ( In the context of Indian Market for 
Insurance in the Contemporary Times )

I am writing here to precisely explain the picture of the arrangement of a Non-Employer-Employee Group Insurance Scheme which the institutional or fraternity groups may be trying to lunch or may have lunched for their members and the readers may be contemplating to participate or not to participate, I am explaining you independently without obligation to anyone. I am writing it, just as indicative explanation of the general modus operandi, but in specific cases it may have been worked out differently.
There are a bunch of 3rd-Parties, called as Insurance Brokers/Aggregators, who work on the Agency Commission earning which is up to 15% ( 15% is the ceiling of commission payable to the Insurance Agents/Intermediaries, as per IRDAI ( Insurance Regulatory Authority of India ) Rules, 2016 (amended up to date for Non-Employer-Employee Group Insurance), who have come up in India after the market was opened. Some of them are a bit Older ones, some of them are start ups.
Those Aggregators/Brokers work through the real and registered Insurance Companies in Public Sector and Private Sector depending on their convenience, as their Brokers.
The institutions for example like Alumni Associations of Educational Institutions, Housing Societies Residents' Associations, Trade Associations or Similar Such Peer Groups who are established for their own purposes and not exclusively for taking a Group Insurance Policy purpose, desirous of taking a Group Insurance Policy for their Members, get hooked to those 3rd-Parties. 
First, there should be a deal agreement between the Management of the Institution and the Brokers for mutual engagement.
Thereafter they design a system of working for Group Insurance Scheme for their members considering different insured and premium parameters. The Insured Parameters could be targeted coverage of insured persons such as Self, Spouse, Children, Parents and In-law Parents. The premium parameters are linked to the Age, Profession, Pre-known illness/diseases and other personal parameters of the insured persons.
Then the Scheme of the Group Insurance Scheme such as, Group Health Insurance Scheme for example is Offered to the Members of the Institution. It is necessary that the Members of the Institutions are given the details of the Scheme in most Transparent manner so that the Members can trust the scheme and there should be scope for minimum doubt of members over the scheme.
Normally, through the Institution Website-linked through the 3rd-Party (Broker) Website-Platform, the Money is collected from the real aspiring customers (members of the institutions) who are looking for an Insurance Policy through the Group Insurance Scheme of the Institution with the sole intention( in most of he cases ) to get a low premium rate for their insurance coverage.
A Standard and Bench Marked Premium rate including the Commission target ( 15% ) is normally targeted to be collected from the Real Customers who want to purchase insurance policies, so that those amounts of premium can fetch a Group Insurance Policy from a number of Insurance Companies in the Market.
The Money so collected is kept in an Escrow Account ( I believe the readers would know what an Escrow Account is. The money collected, may not be paid to a Real Insurance Company and a real policy in force may not have been issued. Or an advance policy cover on account of or in the name of the Brokers is issued, it remains in the Broker's Control ).
After a specified period of time ( specified period for buying insurance allowed to the Insurance Buyers who are the members of the Institutions), depending on the number of Real Buyers of Insurance Policies (members of the concerned institution who bought the insurance through the Group Insurance Scheme) and the data analytics of the Customers like their Age, Professional and Personal Profiles, the Brokers go to Insurance Companies for negotiating/bargaining a Master Group Insurance Policy. That is where they manage the things to get a real premium for the Master Group Insurance Policy, that will not be known to the Real Customers who have bought the Insurance individually paying through the Institution-Website-linked-to-3rd Party-Broker-Website. What the members of the Institution might have paid as premium amounts may not be the realities, and there can be convenient buying processes done by online processing giving a good feeling to the members and that are primarily, superficial cosmetics. At that negotiating/bargaining stage the Brokers also fix up to 15% Commission ( 15% is the ceiling allowed under the Regulating Rules of IRDAI, it may be lower if the Brokers agreed ) that may be shared by the Brokers and Anybody and Everybody..... the readers can understand it easily. At this Bargaining/Negotiating Stage with the Insurance Companies, the Brokers may be able to bargain a lower premium and in such a case the Brokers may also save/earn good amounts from the Premium thus collected from the Real Buyers of Insurance through the Group Insurance Scheme as they pay a Bulk Amount in lump sum to the Insurance Company and not the entire amount they would have really collected from the Individual Members of the Institution collectively and holding the collected Bulk Amount in Escrow Amount in their control. 
After the specified buying period given to the Members, the Brokers keep a Dry Period also for Negotiating and Bargaining and issue of a Master Insurance Policy as Group Insurance Policy, to complete the agreement formalities and Master Policy Issues with the Insurance Companies. Once the Master Insurance Policy as the Group Insurance Policy is issued, the Insurance Company and the Brokers communicate about it to the Institutions and the Members who are insured under the Group Insurance Policy. The Group Insurance Policy starts its force from the date the Master Insurance Policy is issued by the Insurance Company which should be a later date and not the date on which the Individual Members might have purchased the insurance by paying the insurance premium amounts through the designated online systems of the institutions.
There the Issue Comes who takes the 15% Commission ( or a rate lower than it if agreed with the Insurance Company) that can be paid by the Real Insurance Company from the Premiums Paid ? The Brokers or some people sharing along with them that would depend on the Brokers and their collaborating Institutional Authorities as the situation may be existing in concerned places? It could be big amounts if the Number of Real Policy Buyers in the Group Insurance Could be large ? If this 15% Commission is reduced to minimal level say 1-2-3-4-5 %, the Premiums can be substantially low for individual members as well, that is where also it is managed by those Brokers and their collaborating institutions, the readers can think about it in any possible direction. The Savings from the Bulk Amount Collected from the Members while paying the Bulk Premium of the Master Insurance Policy (Group Insurance Policy) finally they get issued is also enjoyed by them in addition to the 15% Agency Commission they are allowed to Claim from the Insurance Company for the Premium Amount they pay as lump sum for the Master Insurance Policy ( Group Insurance Policy ) they get issued from the Insurance Company. The Institutional Office Bearers may be sharing the Savings from Bulk Amounts collected from the Members of the Institutions in addition to sharing the 15% Agency Commission, that the Members of the Institutions should be able to understand by their means and take precautionary measures for it not to fall prey to it for their larger interests.
Normally where the Institutional Management or Authorities work without looking for their personal benefits and do not share the savings from the collected Bulk Amount that stays in the Escrow Account, and also from the Brokerage/Commission with the Brokers, the Brokers may agree to work at a much lower rate of Agency Commission and in such cases the members of the institutions who are the real buyers of insurance and insured persons, get the low premium burden benefit. If the institutional Office Bearers work for their vested interests and personal benefits, then it is obvious that the Institutional Members will have to bear a lot of hidden costs that would be enjoyed by the Brokers as their windfall gains and enjoyed by such Office Bearers as their personal benefits by cutting into the larger interest of the Institutional Members.
What I have said above are normal general modus operandi, it may be different for different institutions and different Brokers as they agree and make the deal agreement among themselves. 
The whole operations would depend on the Institutional Authority(the Office Bearers) who are facilitating the process, the Brokers and the Insurance Company who issues the Master Insurance Policy as the Group Insurance Policy for the members of the Institution.
As I said, if the Institutional Authorities (the Office Bearers) work honestly that can press the Brokers to work with lower charges and it can be a better deal for the institutional members buying insurance under the Group Insurance Scheme. The Real Keys in such cases will be with the Office Bearers of the institutions regarding their personal integrity and how honestly they work while in Office and how well they handle the Brokers in the larger interest of the Members of their Institutions where the Institutional Members are opting for a Group Insurance Policy either, General/Health Insurance or Life Insurance, whatever.

About the Author : Dr. Nimain Charan  Biswal is a B.Sc.(Agri. Science and Technology), M.B.A. and Ph.D.(Management Area ) by qualifications; and he has 36+ years of work experience in both  industrial and development sectors in diversified fields of social importance. He has been educated at Orissa University of Agriculture and Technology (OUAT)-Bhubaneswar, Institute of Rural Management Anand (IRMA) and Gujarat University (with Resource Support of IIM-Ahmedabad). He is further educated at IIM-Calcutta, XLRI-Jamshedpur, Apple Computer Industries and Spar Inc., USA. He has worked for reputed National and International Organizations in Senior/Top Management Capacities at Board level as well as Managing Director and CEO. He is a management expert covering extensive areas from management in industrial sectors, management in agriculture and dairy, development management to management of public systems. He is a prominent professional of India and known Internationally as well. He lives at Mumbai in India.

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