For a public employee association to qualify as the policyholder of a group life insurance...

C is correct. Hawaiʻi permits qualifying public employee associations to serve as policyholders of group life insurance, but the association must be a genuine organization rather than a group created merely to obtain favorable insurance treatment. HRS §431:10D-207 requires the association to have been formed for purposes other than obtaining insurance .

The statute additionally requires, when the policy is placed in force, that the association have membership within the eligible classes equal to at least 75% of the employees eligible for membership in those classes . Eligible insureds generally consist of all association members or all members of a bona fide class or classes. Premiums may be paid from association funds, charges collected from insured members, or both.

These requirements help prevent adverse selection and the artificial creation of groups solely to acquire insurance. Bona fide group insurance is based on an employment, association, or similar relationship that exists independently of the insurance transaction.

Options A and B state the opposite of the statutory requirement. Option D is also incorrect; an insurer issues the group contract but does not need to create the public employee association.

Reference topics: HRS §431:10D-207; Public Employee Association Groups; Bona Fide Groups; Group Life Eligibility.

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