Right of transfer to individual insurance

Purpose

In a genuine group insurance scheme, it is not the individual insured person but the group sponsor, such as an employer or professional association, that is the insurer’s contracting party. If a person leaves the insured group, for example through retirement or termination of employment, or if the group contract as a whole is dissolved, they would otherwise face the outright loss of cover. The right of transfer secures the ability to continue equivalent cover as an individual policy on the tariffs and conditions applicable to individual insurance.

Effect and limits

Continuation occurs without a new waiting period and without a fresh health assessment, provided the person was insurable under individual-insurance standards when they joined the group scheme. The insurer must inform the person of this right; if it fails to do so, the exercise period is suspended. Where the right is exercised in time, the individual premium is based on the age at which the person originally joined the group scheme rather than their current age, avoiding the price increase that would otherwise apply. The right lapses if the insured person’s own breach of contract caused the insurer’s extraordinary termination.

Negotiation and practice

For members of liberal professions or association members covered through a group scheme run by a professional body, the right of transfer is of considerable practical importance on leaving the profession or retiring, since taking out new cover at an older age would be significantly more expensive, or impossible altogether if no longer insurable. The one-month exercise period should be actively monitored, even though a failure by the insurer to give notice suspends it. On leaving a group scheme, it is advisable to make an early written enquiry to the insurer about the specific terms of continuation.