There is admittedly sometimes a bit of a misunderstanding about the benefits of having a group policy over an individual policy. Hopefully, this article can clear things up a bit for you. Firstly, a group policy is usually structured for an organisation (eg. for a business, usually with more than ten employees but there are some products for companies with just two employees onwards) while an individual policy is structured for an individual person or a nuclear family. Certainly, some group policies can give you an option to add family members of employees as dependents – but how group policies work and differ is outside the scope of this article– I will publish a separate article about this shortly.
When referring to a ‘group’ policy, one may assume that this is simply a portfolio or ‘grouping’ of some individual policies and that as a result of the scale economies or efficiencies brought about, a ‘group’ or ‘corporate’ discount is offered. However, this is not quite the case – usually far from it – indeed you may find group policies working out to be more expensive per member than an individual one!
It’s not that group policies do not bring about the benefits of scale – they most certainly do. But rather than these benefits straightforwardly reflecting themselves on the lower cost of insurance, they’ve found better uses – namely in terms of scope – the covers and benefits offered under the policy. It is widely known that you can’t buy (as of now) an individual medical insurance policy in Dubai and most other Emirates that covers you for pre-existing conditions (i.e. ailments that you may have prior to taking up the policy). Why? Well, the common analogy is to that of car insurance – you can’t buy an insurance policy on your car after it’s had an accident – after all, insurance isn’t for certainties – otherwise it wouldn’t work. They’d simply know how much they have to pay out and add on their expenses and profit margin to come up with your insurance premium! But the story differs if you’re talking about group policies where you can indeed cover pre-existing conditions.
Similarly, in addition to not covering any pre-existing conditions, individual insurance policies offer restricted (if any) covers for maternity or pregnancy – you may either find those with nine or twelve or twenty four months long waiting periods or those that do not cover anything pertaining to maternity costs or sometimes those that cover only complications or acute conditions of maternity.
With a group policy, however, you can cover pre-existing conditions and maternity without a waiting period because of the inherent benefits of a portfolio approach. The concept of a group health insurance policy is often compared to a societal financing scheme whereby medical costs borne by a few are shared by many – this is essentially the conceptual definition of insurance itself.
But in essence, the insurance company uses the volume of premium created by group medical policies to open up the floodgates a bit and cover for conditions which they would otherwise just not be able to cover because of the risk involved. From major covers like pre-existing conditions and maternity to the luxury covers like wellness, optics, vaccinations and even life insurance compensation – group medical insurance truly opens up opportunities for increased benefits. After all, it’s unlikely that every female in the group would become pregnant or every member has a serious pre-existing medical condition – therefore the risk can be calculated based on probabilities and a price be put on a group. If you’re wondering why this can’t be done for an individual – the one-word answer is that a policy with such benefits would create ‘anti-selection’ i.e. all the people with the intention of claiming under a certain section insure with a company that covers that particular situation.
For example, very recently the portfolio of a major local insurer collapsed because they were covering maternity for individual policies without a waiting period. Even though they were charging more than double the premium that others were charging for a roughly equivalent product (other than this specific difference), they could not contain claims costs and eventually had to book major losses and go back to imposing a waiting period like everyone else – they just could not afford to pay for almost every other policyholder that was claiming for pregnancy – essentially people were just signing up when it was time for them to have a baby! And only those that wanted babies were signing up – why would anyone pay so much more otherwise?
Of course, the extent of benefits and pricing on group and individual policies depends on various factors and this is worthy of a separate article – but in essence, I hope one can now appreciate how not to just simply expect a ‘cheaper’ policy because it’s a group policy but rather a more beneficial one. Certainly, it’s possible to structure a group policy as a collection of individual policies and thereafter offer a group discount but what’s the point? Anybody on an average individual insurance plan in the UAE would tell you how these plans have many caveats and restrictions to them and as a professional insurance broker I can add a disclaimer to anyone with an individual policy that if, God forbid, a serious medical condition comes up your insurer may actually find ways to disallow you from renewing your policy – terrible fact of reality in this part of the world, but it has happened frequently in the recent past – note here that your insurance broker would have to play a crucial role at such times by standing by your side and fighting the big, bad insurers – make sure you find the right one!
Whether you’re looking to take up an individual health insurance policy or structuring a group portfolio for your company, please be in touch with us on InsuranceMarket.ae and we would be happy to give you various options, implement the cover and thereafter also manage your claims for you on a fast-track basis.