6.1 Principles of Group Insurance
The basic principle of group insurance is to provide insurance coverage for a number of people under one contract known as the single master contract or master policy.
Each eligible employee fills out an enrollment card and is given a certificate of insurance which summarizes the coverage terms and explains the employee's rights under the group contract. Underwriting for group coverage is different than for individual coverage; the underwriter looks at the characteristics of the group as a whole. New employees typically must go through a probationary period before they are eligible for coverage.
Since group insurance allows for lower premium payments, dwindling enrollment would not be beneficial to keep costs down. Through group coverage, the insurer usually does not feel any effects as they have a captive flow of insureds. Some employees will leave, yet others will enroll to make up for any lost revenue.
Group insurance involves experience rating, which is a method of establishing a premium for the group based on the group's previous claims experience.
