group insurance

Group insurance is an insurance that covers a group of people, usually who are the members of societies, employees of a common employer, or professionals in a common group.

Group insurance may or may not be converted to individual coverage. As group insurance gets big business for an insurance company with minimum operational expenses (under one master policy issued to an employer, union or any recognised group), it is usually less expensive than individual policies.

Group coverage can help reduce the problem of adverse selection by creating a pool of people eligible to purchase insurance who belong to the group for reasons other than for the purposes of obtaining insurance. In other words, people belong to the group not because they possess some high-risk factor which makes them more apt to purchase insurance (thus increasing adverse selection); instead they are in the group for reasons unrelated to insurance, such as all working for a particular employer.

A feature which is sometimes common in group insurance is that the premium cost on an individual basis may not be risk-based. Instead it is the same amount for all the insured persons in the group. So for example, in the United States, often all employees of an employer receiving health insurance coverage pay the same premium amount for the same coverage regardless of their age or other factors. Whereas under private individual health insurance coverage in the U.S., different insured persons will pay different premium amounts for the same coverage based on their age, location, pre-existing conditions, etc. Another distinctive feature is that under group coverage, a member of the group is generally eligible to purchase or renew coverage all whilst he or she is a member of the group subject to certain conditions. Again, using U.S. health coverage as an example, under group insurance a person will normally remain covered as long as he or she continues to work for a certain employer and pays their insurance premiums whereas under individual coverage, the insurance company often has the right to non-renew a person's individual health insurance policy when the policy is up for renewal, which they may do if the person's risk profile changes (though some states limit the insurance company's ability to non-renew after the person has been under individual coverage with a given company for a certain number of years).

In Canada group insurance is ussually purchased through a broker because brokers receive better rates than individual companies or unions. Bigger brokerage companies like PACE Consulting receive better premiums from the insurance companies and get the companies better rates.

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