Discount Insurance Pricing


Discount Pricing:

In insurance sector, discount is offered if group insurance is opted for.

Group Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low. Under Group Insurance Scheme, life insurance cover is allowed to all the members of a group subject to some simple insurability conditions without insisting upon any medical evidence. The restrictions under a Group Term Insurance Scheme mainly relate to size of the group, amount of cover allowable, minimum and maximum age limit for eligibility of cover (18 & 60), participation of minimum percentage (75%) of eligible members of the group at inception and compulsory participation of all new members.

Premium Chargeable:

Group (Term) Insurance Scheme is at present offered under One Year Renewable Group term assurance plan (OYRGTA). Every year on Annual Renewal date LIC charges the premium depending upon the changes in size and age distribution of the age group.

The Premium rates applicable to a group at commencement depend on its size as also the occupation, employment and working conditions of the members of the group. Subsequently, the Premium Rates may be reviewed on the basis of actual experience. In some schemes, a part of the excess of premium over actual claim is allowed as rebate from subsequent year’s premium as Experience Rating adjustment or Profit Sharing if the claim experience is favorable.

Discount is given on group insurance scheme because the insurance company gets a large number of customers at a time and hence it saves expenses on promotion and advertisement, which are to be incurred to attract new customers.

Thus, discount is given in order to attract more customers at a time by this group insurance scheme. The cost incurred on giving discount is much less as compared to the cost spend and advertising and promotion. Hence discounting is much more profitable for the company.

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