The regulator has said that group insurance schemes should show collection of premium, issue of certificate of insurance and reimbursement of expenses. Also, interest rates declared under group savings products should be in such a way that there is no discrimination among identical policyholders on fund size. Where a group policyholder maintains pension funds with more than one insurer, the policyholder should have the option to choose any insurer to purchase annuity.
Every employer buys group gratuity cover, as it is a statutory liability. Companies issue a tender for group scheme on an annual basis. There is an actuarial calculation, which goes into arriving at the liability of an employer ba- sed on the number of years of service by the employees, as well as their age, attrition and number. Companies set aside funds for superannuation and gratuity as well. Group insurance business includes group superannuation scheme, which is a pension plan for employees after their retirement from active service. Insurance companies manage this fund by levying a charge. Some insurers focus on group businesses where they pay higher returns on gratuity funds invested with them.
Group savings products will now levy a surrender charge, if surrendered within the third annual renewal of the policy, not exceeding 0.05% of the total fund value with a cap of Rs 5 lakh. Upon surrender of a group policy, those covered should be given an option to continue it as an individual policy. “Group insurance schemes have moved away from unit rate and now we will have to do individual profiling of people,” said RM Vishakha, the managing director of IndiaFirst Life Insurance.
“For all group savings non-linked pension products with the defined benefits subscribed to by an employer, where the scheme does not maintain individual member accounts and only maintains a pension fund, there shall be an assured benefit on the entire pension fund available with the insurer and an assured benefit available on death of every member,” the regula- tor has said.