Financial Risk Manager

Ways of Financial and Risk Management

Group Term Insurance Scheme
Tuesday, April 7, 2009

In 1972 a clause 10-B was added to the Industrial and Commercial Employment (Standing orders) Ordinance 1968 making it compulsory for employer to have the permanent workmen insured under Group Insurance.

The relevant clause reads as follows.

10-B. COMPULSORY GROUP INSURANCE:

The employer shall have all the permanent workmen employed by him insured against (natural death and disability and) death and injury arising out of contingencies not covered by the Workmen's Compensation Act, 1923 (VIII of 1923) , or the (Provincial) Employees Social Ordinance, 1965 (Ordinance No. X of 1965).
The employer shall in all cases be responsible for the payment of the amount of premia and for all administrative arrangements whether carried out by himself or through an insurance company.
The amount for which each workman shall be insured shall not be less than the amount of compensation specified in Schedule IV to the Workmen's Compensation Act, 1923 (VIII of 1923).
Where the employer fails to have a permanent workman employed by him insured in the manner laid down in clauses (1), (2) and (3) and such workman suffer death or injury arising out of contingencies mentioned in clause (1) the employer shall pay, in the case of death, to the heirs of such workman, or in the case of injury, to the workman, such sum of money as would have been payable by the insurance company had such workman been insured.
All claims of a workman or his heirs or recovery of money under clause (4) shall be settled in the same manner as is provided for the determination and recovery of compensation under the Workmen's Compensation Act, 1923 (VIII of 1923).

Under sub clause 4 it has been made obligatory for employer to pay the claim amount if he fails to have his worker insured. This provision is some time interpreted to arrive at the conclusion that it is not necessary to secure group insurance if employer is prepared to pay the claim amount himself. The correct position is that apart from this liability their is a penalty laid down (SR-7) for not implementing the Standing Orders. As such apart from payment of the claim the employer shall be exposed to the penalty if he does not secure group insurance cover. This version was up held by the competent court (1990 PLC 444).

Labels: Insurance