Why is cover under a voluntary scheme usually cheaper than an individual policy?

Cover under a voluntary scheme is generally cheaper than an individual policy primarily due to the concept of economies of scale, as well as the reduced marketing costs associated with group policies.

When a voluntary scheme is implemented, it allows a larger group of individuals to be covered under a single policy. This pooling of risks means that the insurer can spread out the costs of providing coverage over a larger number of people, which often results in lower premiums for each participant. Additionally, the marketing and administrative costs are distributed among the participants, leading to a decrease in expenses per policy.

In contrast, individual policies typically require personalized underwriting, which can lead to higher premiums due to the specific risk assessments performed for each applicant. Furthermore, individual policies may include additional costs for the insurer, such as tailored benefits and administrative overhead associated with processing each application separately.

Overall, the structure of voluntary schemes leverages group dynamics to provide more affordable coverage options compared to individual policies.