Functions

The usefulness of group insurance may be considered from the viewpoint of the employer, of the employee, and of society. The employer, by taking out this form of protection, binds his employees more closely to him, and inculcates something of the cooperative spirit. If the face of the policy is made equal to the salary list, he offers a reward for continued service. And all this is accomplished at the extremely low cost of about l1½ percent, of the payroll. Were this percentage added to wages or salaries it would receive little attention, but the fact of insurance for a substantial sum looms large in the eyes of the employee.

Group insurance may be of importance to the workingman even if his employers do not pay the premium. A firm may arrange to take out a group policy solely for the purpose of enabling its workers to obtain the lower rates, thereby protecting their families at a minimum cost. In this case the employer assumes the responsibility for the payment of premiums and acts as an accounting agency between the company and the insured.

Socially, insurance in groups has muck the same justification as has workmen's compensation, and covers cases where the latter would not apply. Society demands that provision be made for the proper wants of its members and group insurance assists in providing for a class which ordinarily has little ability or inclination to care for itself. It is further socially advantageous in that it accomplishes its results at a lower social cost than does ordinary life insurance or industrial insurance, because of the reduction in expenses made possible.

It has been suggested that there are grave possibilities of discrimination in granting group contracts with their lower rates. If the rates quoted are so low as to be unprofitable and require encroachment on the receipts from other forms of insurance they are obviously discriminatory. But with careful selection and adequate supervision there is every reason for recognizing the better risk and the savings in expenses by more favorable premium charges. It is one step toward more adequate recognition of the variability of risk and accurate adjustment of rates thereto.