Insurance is expensive. One of the main factors why is that insurance companies have to realize substantial returns on their investments by taking into account the cost of capital, risk, regulatory and compliance costs, future growth opportunities, and other expenses.
One way companies can increase their profits is through group insurance in Singapore is a scheme that offers better rates than they could earn on individual policies. This form of group coverage offers insurers significant savings from the potential loss claim experience. In fact, group insurance is a more favorable risk class since the actual loss is likely to be substantially less than the premium paid by the members.
Although the cost savings are attractive, group insurance programs can only benefit employers and employees through an employer-sponsored group plan. As such, they must enter into a master policy written on their own lives where they will share one or more pools of insured persons all participating in a common business or profession.
So how can we ensure our employees in group coverage?
Group insurance in Singapore policy serves as a shared risk profile for their employers. Most companies, especially those with large turnovers, are hesitant to opt for group insurance in Singapore since it is expensive and the employer does not have any control over the plan. So how can we use a single policy to cover our staff? The answer lies in the concept of “shared risk pools”.
Shared risk pools mean a group of people sharing the same risk. For example, a group of people that all share the same financial goals (e.g. buying a house in one or two years) are in the same shared-risk pool. These people may be your family, or friends and colleagues working together for one common goal. Group insurance policies offer companies to create shared risk pools for free, where employers and employees are able to share the same pool so that they can enjoy significant savings in their insurance premiums.
Thus, employers must be willing to share the risk with their staff to create a group insurance scheme. For employers that do not have a large number of employees, there is an alternative for them – pool their resources with other companies with similar employee make-up. This creates an opportunity for employers who are on a smaller scale to band together with other companies so that they can enjoy the same level of coverage as big companies but at much cheaper premium costs.
For employers that have a large number of employees, it will usually be more profitable for them to create their own proprietary insurance scheme since they may have the ability to get a better premium rate. Shared risk pools are commonly able to attract only a small number of participants which means that insurers are able to offer them lower (and sometimes even free) rates due to the lower risk profile.
The exclusivity of group insurance has caused group insurance coverage providers in Singapore to introduce shared-risk pools (but not pooled private premium). This will allow employers and their employees to sign up for a single group insurance plan. The premium rate is much cheaper than if each person separately signed up for a group insurance plan.
Group Coverage Singapore is an example of this type of shared risk pool. Their uniqueness lies in the fact that they are able to provide employers and their staff with shared-risk pools (but not pooled private premium) at very attractive prices.
