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Nath Balakrishnan

IN THE intensely competitive age we live in, organisations across the globe have displayed an inclination to go that extra mile to retain their best employees. And why not? After all, an organisation's position among its peers in the industry is primarily determined by the quality of the talent it has.

Rolling out employee stock option plans was one of the earlier strategies adopted by organisations to reward and retain outstanding perfomers. Plans aimed at retaining employees soon started to proliferate, with companies providing for flexible working hours and permitting employees to work out of their homes (made all the more easier due to rapid advances in technology).

Taking this one step further is the group term plans that has been launched by private insurance players. Such a plan — under which a group of employees in an organisation is covered — is mutually beneficial to the employer and the employee.

The family members stand to receive financial compensation in case any unfortunate development were to befall the employee; the employer, on the other hand, is assured of the loyalty of his employee, who will perceive such a move as one aimed at protecting his well-being.

Plan features

In such plans, the policyholder will be the organisation wishing to provide cover to its employees. The minimum age for entry of employees into the plan as well as the minimum number that can be covered varies from player to player. For example, in the case of ICICI Prudential, the minimum entry age is 18, and the minimum number of employees to be covered is 25. The cover will cease to exist at 60. Under Aviva's plan, the minimum and the maximum age at which cover ceases are 18 and 65 respectively. A minimum of 20 employees have to enroll under this plan.

In case an employee covered under the plan dies, the sum assured is paid out to the beneficiaries. Options are also available when it comes to determining the extent of the sum assured for each employee. An organisation can opt for a uniform sum assured for all members of the group; the sum assured can be a function of the employee's rank in the organisation; or it can be a multiple of the employee's salary.

Some of the riders offered by different players, include the Critical Illness Rider, Accidental Death Benefit Rider (ADBR) and the Accidental Disability Benefit Rider. If an organisation opts for, say, the ADBR and an employee dies in an accident, his beneficiary will not only receive the basic sum assured but also the sum assured under the ADBR.

Premium payments

The total premium to be paid under the plan is a function of the number of employees to be covered under the scheme, the sum assured opted for in the case of each employee, the age distribution of the members to be covered and also their rank in the organisation. Premiums can either be paid lumpsum, or in monthly, quarterly, and half-yearly intervals. In the case of new members entering the group, their premiums can be paid on a monthly basis if the lumpsum premium payment option has been taken initially.

These plans have a duration of one year and will have to be renewed subsequently.

Free cover limit

The free cover limit is extended to a group without subjecting members to a medical test. This depends on the number of people to be covered as well as the average level of cover chosen. Higher the average cover as well as the number of people to be covered, the larger will be the free cover limit. In case an organisation decides to go in for a cover amount that is higher than the free cover limit, underwriting is mandatory.

Other benefits

As in the case of non-life insurance under which a discount in premiums is extended when the policy comes up for renewal provided no claims have been lodged during the earlier policy tenures, a similar feature is also available under these plans. To illustrate, consider AMP Sanmar's group term plan. This plan has a feature under which the policy will be reviewed after three policy years and the claims experience examined. If the company determines that the claims that have arisen have been low, it may decide to refund a part of the premium back to the organisation. This will, however, not be paid out as cash but in the form of a credit that can be adjusted against the subsequent years' premium payment. A similar feature is available in plans offered by Aviva and Allianz Bajaj.

Exclusions

As with life insurance plans, there is a list of exclusions under which the insurance provider will not pay a claim. A head under which no claim will be payable is if death is on account of suicide within the first policy year. Additionally, if an employee has been on leave either because of sickness/injury for a specified period (this is stipulated by the insurance company) in the year just prior to becoming a member under such a plan, then he/she will not be provided with cover.

Advantages of the plan

Such plans provide cover at a cost which is lower than what it would be if an individual were to take a term plan on his own. Additionally, players, such as Allianz Bajaj and HDFC Insurance, also permit the employee to chip in with a certain portion of the premium which will entitle him to a tax rebate.

By taking such a plan, a company will be sending out the signal that it places a premium on the security of its employees as well as their dependents. It will also serve as a morale-booster to employees and encourage them to give their jobs the best shot.

After all, when a company's best talent walks out of the office door every evening, an insurance plan such as this will be a small step to ensure that it does not walk into a competitor's office.

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