How to minimize cost for employees group insurance policy

Nowadays most organizations offer employees Group Insurance Policy. Group insurance policies like group health insurance, group term insurance, etc.; are some of the policies which are offered to employees.

Key Takeaways

• The Deductible Effect: When employees share a portion of the risk through a deductible, they tend to be more judicious about filing claims. This improves the claim history, which prevents insurers from hiking premiums during renewal.

• Trim the “Frills”: To keep costs low, focus on the primary risk. Avoid adding non-essential benefits like education allowances or expensive riders (critical illness, etc.) unless they are central to your talent strategy.

• Prevention as a Cost-Saver: Investing in workplace wellness—such as disease management for asthma or diabetes—can save money. Early diagnosis prevents expensive hospitalizations that would otherwise impact the group policy.

• Smart Shopping: Premiums vary significantly between providers. Comparing all available options ensures a company finds the “sweet spot” between comprehensive coverage and an affordable price point.

• Employee Participation: If the organization provides a solid base plan, it can offer employees the option to purchase “add-ons” or extra riders at their own expense using the group’s negotiated rates.

On the one hand, these insurance policies bolster the morale of employees, on the other, these are an added cost to the insurance company. To minimize cost, here are some of the ways through which you can control the cost for employee group insurance policies –

1. Increase Deductible

Opt for a high deductible in the group health insurance policy which means, your employees would also have to bear a portion of the claim amount. It means, your employees would think twice before approaching the health insurance claim as now they would also have to pay the claim amount. It will reduce the number of claims, and when the claim would be low, the group health insurance will not increase the premium at the time of renewal. Most of the group health insurers increase premiums at the time of renewal if there are frequent claims.

2. Restrict Cover

It is good to offer group insurance schemes, but it is necessary to restrict the coverage to save money. For instance, if you are offering group personal accident insurance, stay away from offering education allowance to your employees’ children. Similarly, in the case of group health insurance, stay away from covering parents of employees. Further in the case of group term insurance cover, don’t add riders like an accidental rider, critical illness rider, etc. However, be diligent while restricting the coverage. There is no point in offering an employee group insurance policy if it has few benefits.

3. Shop Around

Just buying group insurance without comparing is not a good move. There are various insurance companies that are offering group insurance policies and therefore, it becomes necessary to compare all the available options in order to find the right. In case you are unable to find the right insurance policy by own, it is advised to take the help of corporate insurance advisors like SecureNow which can help you choose the right policy as per your requirements. In this way, you can find the right group insurance policy at easy premium rates.

4. Keep employees healthy

To control premium rates of your group insurance, mainly group health insurance, create a conducive wellness program in your organization. Such programs not only keep employees healthy but also help in lowering the number of claims, which in turn translates into a lower insurance premium.

Read More: What is deductible under employee group insurance policy

Case: 1

Since 2012, J.K Engineering has been successfully working in the engineering segment. Among various benefits offered to its employees, the company is also offering a group health insurance policy to its employees. While the policy has proved to be of great help to its employees, it has also increased the expenses of the company which it is now spending towards premium.

Last year, J.K Engineering started a comprehensive wellness program at its workplace that comprises disease management for diseases like asthma, diabetes, hypertension, etc.; as well as offering cancer screening and around-the-clock medical staff.

The wellness program has a positive impact not only on its employees but also on the company. Medical screening has helped in diagnosing ailments at an early stage so that they can be treated without delay. As a result, fewer employees would require approach their group health insurer for the claim settlement, and it also helps in keeping group health insurance premium rates in check.

Summary Table: Strategies to Control Group Insurance Costs

Case: 2

J.K Associates has a flourishing clothing business in Surat. Though the company is offering various benefits to its employees; it recently decides to offer group term insurance cover as well. However, the company is looking for various ways through which it can offer the policy without incurring high costs.

In this case, J.K Associates can think of purchasing a group term insurance without adding frills. The company doesn’t need to add riders, like accident death benefit riders, critical illness riders, etc. In case, an employee needs any extra benefit, he/she can pay an extra premium for this.

Frequently Asked Questions (FAQs)

1. How does a “high deductible” specifically lower our corporate premium?

A) Insurers view a high deductible as a sign that the employer is sharing the financial risk. Because the insurer is only responsible for costs exceeding the deductible amount, they charge a lower premium. It also reduces the administrative costs of processing many small claims.

2. Is it better to exclude parents from group health insurance to save costs?

A) Covering parents significantly increases premiums because older individuals have a higher risk of hospitalization. To save costs, many companies offer “Base Cover” for the employee, spouse, and children, while allowing the employee to add parents by paying the additional premium themselves.

3. What are “riders” in group term insurance, and are they necessary?

A) Riders are add-on benefits like Accidental Death Benefit or Critical Illness. While they add value, they also increase the cost. For a budget-conscious firm, it is often better to provide a high base sum assured rather than a lower one with multiple complex riders.

4. Why do insurance companies increase premiums even if we haven’t changed our staff count?

A) Insurers look at the claim frequency and total payout of the previous year. If employees made frequent claims that exceeded the expected ratio, the insurer will likely increase the rate at renewal to cover their potential losses.

5. How does an office wellness program lead to “lower insurance premiums”?

A) A healthier workforce means fewer emergency room visits and shorter hospital stays. Over a 1–2 year period, a successful wellness program reduces the total claim payout of the group. When an insurer sees a “low claim history,” the company has much stronger bargaining power to negotiate lower premiums.

About The Author

Mayank Sharma 

MBA Finance

He is a professional who brings extensive knowledge and expertise to the field of group health insurance. He has dedicated 7years to helping individuals and businesses navigate the complexities of insurance. Having worked closely with numerous clients and insurance providers, he deeply understands the nuances of group health insurance policies. With a reputation for providing insightful and informative content, he leverages his industry experience to educate readers about the importance of group health insurance and its benefits. Through their articles, Mayank Sharma aims to empower individuals and businesses to make informed decisions about their healthcare coverage, ultimately promoting healthier and more secure communities.