Other Types Of Life And Health Insurers

A complete list of the many types of insurers would be quite lengthy and would include insurers which provide relatively small amounts of insurance. Probably the most significant of these other insurers in terms of the amount of insurance provided are fraternal organizations, savings banks, health expense associations, and governmental insurers. 

Fraternal organizations. These organizations usually operate on the legal reserve basis as do stock and mutual companies. However, fraternal groups are social organizations which operate through the lodge system. The “insurance companies” established by these organizations are managed by directors who have been elected by delegates chosen from the local chapters of the parent organization. In other words, each member of the parent organization has a voice in the management of the insurance operation through an elected representative. 

Fraternal groups operate on a nonprofit basis and have as one of their objectives the offering of low cost insurance to their members. Traditionally the membership of fraternal organizations is founded on some common characteristic such as religion, national background, or employment. 

Savings banks. Some states have laws permitting savings banks to sell life insurance. The major characteristic of this type of insurance is that it is sold exclusively on a mail-order or over-the-counter basis. Banks in each of the states pool their mortality experience and share in actuarial, medical, and other services through a central organization. Because insurance agents are not typically used and commissions are often not paid, the cost of this insurance is relatively low. However, the amount of insurance that an individual can buy can be quite limited. 

Health expense associations 

The most widely known plans providing hospital and medical expense benefits are Blue Cross and Blue Shield. Blue Cross originated as a nonprofit hospital service plan which provided coverage mainly on a service basis, i.e., the hospitals agreed to provide predetermined services to subscribers of the plan. Originally, only some of the Blue Cross plans provided benefits on an indemnity basis. However, this has changed since it’s inception. 

The indemnity basis is the same used by stock and mutual companies in that the insured is reimbursed, subject to the policy limits, for the hospital expenses incurred. Blue Shield, the medical expense plan, may provide medical and surgical benefits on a service basis or indemnity basis depending on the plan and the state. 

Generally, individuals who buy insurance through Blue Cross-Blue Shield plans have no ownership interest, nor do they have a voice in the selection of those who manage the plan. 

In addition to Blue Cross-Blue Shield organizations, several independent groups provide hospital and medical benefits. Such plans are operated by employers, unions, and various community groups. 

Government insurers 

Both the state and national governments have various plans which provide life and health insurance benefits. The state supports these plans by absorbing all its administrative expenses. This subsidy, plus the fact that sales may be made through the insurance commissioner, enables the fund to offer low-cost insurance.