⚡ Instant insurance offered by apps & banks - Should you buy?
At one point in time Insurance was offered only by agents, then came banks, and later by online comparison platforms. Today everyone who has customer data, or traffic, or both wants to offer Insurance to their customers - your travel agent, your payment app, your cab company - and your favourite eCommerce app.
These players promise instant policy issuance, sometimes only by checking a box or two - at very economical premiums. The "group insurance" format allows these players to make such quick and easy offers.
How do they compare with the regular policies that have a long process, medical tests? Are these fast policies really as good as they seem? Or are they like fast food 🍔, attractive but bad for your long term well being.
Let's find out.
What is a Group Insurance Policy?
A group insurance policy is a type of insurance that offers cover to a "group" of individuals with a common intent or relationship with the group owner. For instance employees of a company, customers, distributors of a brand or platform. Group policies are different from individual policies (also called - retail policies) in many ways and come with some benefits as well as limitations. Therefore, it is important to clearly understand the difference between them, before making a purchase.
Who can buy a Group Insurance Policy?
Almost everyone! You can buy this policy simply because you are registered on a portal or belong to a group.
Types of Group Policies
First, let’s understand the different types of group policies you might come across.
- Employer-Employee insurance: Yes, company insurance is a type of Group Insurance. You can get this type of health insurance when you get a job with a company and can keep the policy as long as you’re an employee.
- Group policies offered by banks: You can get this policy if your bank is offering a policy to all their account holders.
- Insurance offered by Associations: Insurance is also facilitated by associations for their group members. For instance, the Dentist association can facilitate a group insurance cover for their dentist members and their families.
- Micro policies offered by platforms: Many platforms like online travel agents, app-based cab companies, now offer small, quick policies while you are buying some other product. For instance, when you book a cab through Ola, you can also opt for ride insurance for as little as Rs. 2. This policy will cover a host of risks while you are riding through their service.
What makes Group Insurance so attractive?
Now that we know the types of group insurance policies you might find, here’s how group insurance catches your eye.
- Less documentation: There is usually very little paperwork and you can mostly complete the entire process online.
- No medical checkups: Generally, you will not need to go through a medical checkup for a group policy.
- Quick issuance: Many times you can get the insurance cover instantly or in less than 24 hours!
- Special Benefits: The group owner negotiates a bulk deal for their user group. During this, insurers are able to provide special features and benefits otherwise unavailable to the individual retail customer.
- Cheaper: Premiums could be often lower compared to retail policies, as the group gets a better cost for the spread of the risk across a large number of people.
What should I know before signing up for Group Insurance?
- Linked to your membership: The policy is only available because you’re part of a group. As soon as your relationship with the group ends, the policy too ends. For example, your corporate health insurance ends as soon as you leave the job, and your bank group insurance ends if you decide to close your bank account. (If you’re buying from an online platform though, this problem won’t be there, as it might only need a registration)
- One-year contracts: All the currently available group insurance policies are one-year contracts. At the end of the year, the pricing and terms can be reviewed and changed, based on the claims that the insurance company received from this group.
- Scheme could be withdrawn: There is always the risk of the policy being withdrawn on short notice if the equation doesn’t work out for both the insurer as well as the group. In some cases, you could be without a cover. In the case of health insurance, if the scheme is withdrawn, the insurance company is responsible to migrate you to a personal/retail insurance plan.
- You are not in control: As the company runs the group controls the negotiations, you will not have any control over the terms, conditions, or customizations in this policy. In the future, the group might want to control costs or improve margins and decide to settle for fewer features/benefits or increase the pricing. Once you are older, you can get the feeling of being stuck with the plan. You’ll not be able in a position to make a decision for yourself.
- Service can be an issue: The group enabling the insurance scheme does not specialize in insurance business or claims. They might not get involved to understand how policies or claims work. Many times they leave it entirely in the hands of the insurer to drive the experience. There have been several instances, where we have observed awful service levels with group policies (especially Bank policies)
Further, when it comes to Company/ Corporate insurance policies or insurance plans from banks, you should keep some additional factors in mind. Below are some specific recommendations for each type.
How to approach a Group Insurance offers? - Our recommendations:
- Take whatever is free: Take advantage of free covers. Keep a note of it and use it before you utilize any of your personal covers. For instance, ensure you make good use of your employer's covers.
- Don't get carried away by the low premium: or instant proposition of such micro covers. Such products can be built to keep the entry cost very attractive, however, the terms can be restrictive that they may never result in many insurance claims. For instance, the Trip delay cover available when you buy domestic air tickets. Now the policy pays only when the trip is delayed beyond 6 hours, not any less - such a delay is extremely unlikely. These and many such conditions built into these policies to keep the claims minimal.
- Buy as a last resort: You should only consider bank group policies as the last resort if you aren’t able to get a cover anywhere else. In our senior citizen health insurance article, we did mention group health insurance sold by banks as an option to consider, when you are not able to get a regular cover due to pre-existing conditions or old age.
- Buy only if meets a short term need: Group covers are short term. For instance, your employer cover is linked to your employment. If your father is old and has a disease, and it is difficult getting a good cover in the open market, there is no harm buying a short term cover while you are employed, that can cover pre-existing diseases too.
How to identify if you have a group policy?
Many have asked this question. Here are some hacks:
How do I know whether the policy offered is a group policy?: Check the terms and conditions - search for the word "group" in there. You will find it what you are looking for :)
How do I know whether the policy I hold is a group policy?: Usually, you can identify a group policy when you notice the words ‘certificate of insurance’ on the top of the policy. There will also be a ‘master policy number’, that belongs to the group you’ll see on the policy document.
What if I want to get out of the Group Policy?
Except for Health Insurance, all other policies will have to be canceled at the time of renewal, by not paying the renewal premium.
If you have a health insurance plan through the same group for years together you can migrate into a similar personal health insurance policy with the same insurance company and get credit for all the years you were invested - this will help reduce your waiting periods. You may however be subject to underwriting, including undergoing medical tests, especially if you have crossed 50 years of age or declared an illness or, made any large claims in the group cover.
Hop on to the comments section below on this same page - and the author will help with a response. In case you want a wider response from multiple experts - you can post your question at www.beshak.org/forum
- Group Insurance policies, including employee health plans or bank plans are only valid until you're part of the group.
- They might come at a low cost - but are often subject to several limitations
- You will not have control over the customisation, features or cost negotiation of a group insurance policy. The group will.
- Group health insurances should be relied on - only if you cannot get a personal health insurance policy - because of a medical condition or affordability.
Multiple people working at and with Beshak come together to make this article really really useful. You can join us too - write at firstname.lastname@example.org