Should I Renew Our Group Medical Insurance or Trust the Bank's Offer? Seeking Advice

Dear Seniors,

My company is providing Group Medical Insurance and Group Personal Accident benefits for employees who are not covered under Employee State Insurance.

Advice on Insurance Renewal

My financial auditor advised me not to renew the medical benefit for the coming year just because the Company Salary account bank is providing us insurance for employees. Kindly advise me on this.

Regards,

The banks that issue Visa cards provide coverage for Rs. 1,00,000/- for accidents, similar to a term plan. However, companies typically offer coverage for their employees and families for accidental death, injury, and medical expenses, including compensation.

Obtaining benefits from Visa is not always easy; employees may not receive them at times. Therefore, it is advisable not to discontinue existing policies.

Thank you.

Please explain to your management about the tendency of the employees in the bank. They will simply pass on the responsibility, stating that the claim has to be processed by Visa and not by the bank. However, the pressure will fall on the company from the Labour Office/factory inspector. The company should bear the cost of medical care and compensation to be paid. Instead of facing significant financial losses, having a medical policy in place would be ideal for cost control.

Up to now, there is no record of any bank paying compensation to the victim or the family of the victim. Yet, we hear about numerous accidents daily. These claims may seem like a formality, but in practice, you are unlikely to receive any compensation from any bank.

What is advised is correct. I would like to add that to escape liability under the Employees' Compensation Act, your policies should fall under the said Act and policies extended by credit card companies or banks like SBI. These are personal accidental death policies that do not exempt the employer from liability under the said Act for incidents occurring during employment.

Thank you,
V K Gupta

If your company has provided insurance and accident coverage to its employees not covered under ESI, it's a good policy. What I suggest is, instead of withdrawing the benefit, try to expand the scope by including family members in the coverage and increasing the principal amount of insurance. By paying a slightly higher premium, it is possible to cover medical expenses, and more. Additionally, if the premium burden is heavy, you could consider asking employees to contribute a small amount. However, discontinuing Group Insurance is not a recommended course of action.

Regards,
Adv. K. H. Kulkarni

In my opinion, the suggestion given by Mr. Baskaran is valid. Banks may unilaterally decide to amend, modify, or annul schemes applicable at their discretion, and you do not have control over it. Moreover, depending upon the age profile, years of service, nature of injury, etc., the compensation amount may vary from employee to employee. However, in my opinion, insurance provided in a salary account by a bank may not have such variables. The procedures followed by insurance companies from whom we take policies are structured, and the principles of compensation are well laid down. Hence, it is advisable to continue existing schemes without getting carried away by schemes being offered by external sources.

Regards,
M.V. Kannan

First, I am surprised that your financial auditor asked you not to renew your insurance policies for staff. It is definitely not within his scope of work or expertise to comment or advise on this matter. In any case, it would be a business decision that has nothing to do with the audit.

Liability Under Employee Compensation Act

Second, the company (as already mentioned) is liable under the Employee Compensation Act for any accidents that occur in the course of business. Furthermore, most progressive companies would also provide medical coverage for employees (it may even be specified in your terms of employment or included in your CTC).

In either case, the company would be responsible for paying the amount of money. If the insurance was procured by the employer, then the employer can recover the money from the insurance company. If the policy is in the name of the employee, or taken out by the employee or a third party, the employer cannot claim that money; it will go to the employee. There have been court decisions (you can search for them on Google) where the courts have ruled that compensation guaranteed under law or contract must be paid even if the employee or victim has insured themselves through other means. The courts have emphasized that the actions of the employee or victim and their prudence in securing themselves should not result in the denial of benefits under the law or contract.

Therefore, you would be exposing yourself to a high level of risk.

Understanding Bank Policies

Additionally, as others have pointed out, banks may unilaterally withdraw or modify any benefits, often without notifying you. It is important to understand which insurance company is involved and the terms, exclusions, etc., in the bank policy.

Overall, it would be a significant mistake to follow the auditor's suggestion.

By the way, please message me the name of the audit firm that provided you with such advice.