The cancellation process of a group health insurance policy can be carried out in the following ways :
Key Takeaways
The “No-Claim” Rule: Refunds are generally only possible if no claims have been filed under the policy. If even a single employee has utilized the cover, the premium is typically considered fully earned by the insurer.
Pro-Rata Refunds: For one-year policies cancelled after 90 days, the refund is calculated based on the number of days remaining in the term. Policies cancelled within the first 90 days may be eligible for a 100% refund (excluding taxes).
Material Disclosure: Insurers have the right to void a policy if the employer hides critical data, such as the actual age demographics of the workforce or pre-existing health conditions.
Credit Integration: In loan-linked insurance, coverage is tied to the debt. Once the loan is closed, the policyholder must proactively inform the insurer to stop the cover and trigger any applicable refund.
Notice Period Restrictions: Once a cancellation notice is served by the employer, the insurance company will typically stop accepting new claims during that 30-day window.
1. Cancellation by policyholder/insured –
If a policyholder thinks of cancelling the group health policy, a 30-day prior written notice is required to be given to the insurance company. After receiving the notice, the insurer will cancel the policy for the remaining policy coverage period and refund the unutilised premium (excluding service tax). However, the refund will be initiated only if no claim has been made under the policy by or on behalf of the policyholder. Also, when the company decides to cancel the Group health insurance policy, the insurer will not accept any claim during the notice period.
The refund after cancellation of the Group Health Policy will be made as per the table below –
| Parameters | Refund Premium (%) | |
| Policy Term – 1 year | Policy Term -2 years | |
| Up to 90 days | 100% | 100% |
| 91-365 days | Refund is on the basis of pro-rata – the number of days left in the policy term | Refund is on the basis of pro-rata – the number of days left in the policy term |
| 366-455 days | Not Applicable | 25% |
| 456-545 days | Not Applicable | 12% |
| Exceeding 545 days | Not Applicable | 0% |
2. Automatic Cancellation –
In the case of the death of the policyholder, the policy coverage shall be automatically terminated. The refund will be made as per the above table, provided no insurance claim has been made under the policy by or on behalf of the policyholder.
Read More: How many employees a company should have to buy a Group Health Insurance Policy?
3. Cancellation by the insurance company –
The insurance company has the right to cancel the policy or coverage by sending 30 days prior written notice to the policyholder at the address mentioned on the certificate of insurance. Therefore, no refund will be made if:
- Insured or any person acting on behalf of either has acted in a dishonest manner
- Insured has not disclosed the material facts or misrepresented facts
The cover can also be cancelled if the insured has not cooperated with the insurance company. In such a case, the insurer will refund the premium on a pro-rata basis, provided no claim has been made under the policy.
Cancellation in case of credit-linked cases – In those cases, where the coverage is attached to the credit/loan tenure, the coverage will exist till the end of the loan term, closure of the loan or policy tenure, whichever is earlier. In such cases, the insured/policyholder should immediately inform the insurer about the closure of the loan so that the policy or coverage can be cancelled.
Case Study 1
Established in 2010, M.S Electricals has been recognised as a profound service provider of maintenance and installation services for electrical equipment. Acknowledged for reliability, effectiveness and timely execution, the company has created a conducive working atmosphere and also offered various health benefits to its employees, like free health camp, reimbursement of medical expenses, etc.
Last year, the company also bought a group health insurance coverage to extend medical insurance services to its more than 2,000 employees. In addition to offering free health services at network hospitals, the policy also promised to cover family members of employees. It was a one-year policy and required to be renewed annually. However, the insurer promised to cover maternity expenses at the time of policy issuance, but later refused to give the maternity coverage at the same premium rate and asked for extra premiums for that.
The policyholder (i.e, M.S Electricals) decided to cancel the policy and opt for another group health policy which was ready to offer extensive coverage, including maternity benefits, at nominal premium rates. M.S Electricals sent a one-month written notice to the first insurance company to cancel the policy. As M.S Electricals had sent a notice within three months of buying the policy, the first insurance company refunded the entire premium amount, excluding service tax.
Read More: How Many Times Can You Update the Employee List in Group Health Insurance?
Case Study 2
R.J Bank is offering group health insurance to its savings bank account holders. Without pre-policy medical checkups, the bank is offering group medical insurance, which is available both as individual and family floater options. In March, this year, the company renewed its group health insurance policy and covered its new savings bank account holders. For those account holders who died in the previous policy year or closed their accounts with R.J Bank, their insurance coverage was cancelled.
Summary Table: Group Health Insurance Cancellation
Case Study 3
As a leading health insurance company, ABC Insurance Company has been offering different health insurance policies to both individuals and corporate. Last year, J.S Mills, a distinguished name in the clothing business, approached the insurer to buy a group health insurance policy for its 500 employees. Though J.S Mills was offering various health insurance benefits to its employees, it was the first time that the company decided to buy a group health insurance policy as well.
One of the representatives of the ABC Insurance Company visited J.S Mills, where the HR department of the company gave the complete details of the employees, withholding information related to the age group of employees. ABC Insurance Company issued a group health insurance policy on the basis of information shared by J.S Mills. However, one month after the issuance of the policy, the insurance company started receiving claims from employees aged above 45 years due to cardiac ailments. Though the number of claims was few, the insurance company decided to cancel the policy because J.S Mill hides the maximum age limit of its employees.
For any further information on group health insurance policies, reach out to us at SecureNow, where we provide a comparison of insurance quotes online so that you could choose the best group insurance or an individual policy according to your needs.
Frequently Asked Questions (FAQs)
1. Can we get a refund if we cancel the policy halfway through the year?
A) Yes, provided no claims have been made by any employee. The refund is usually calculated on a pro-rata basis, meaning you are refunded for the exact number of days left in the policy year.
2. What happens to the insurance if an employee’s associated bank account or loan is closed?
A) In credit-linked or bank-account-linked schemes, the insurance is automatically terminated upon the closure of the primary financial product. You must notify the insurer immediately to ensure the unutilised premium is returned.
3. Why would an insurance company cancel our group policy unexpectedly?
A) The most common reasons for insurer-led cancellation are “Misrepresentation” or “Non-disclosure.” For example, if a company fails to disclose that a large portion of its staff is over a certain age or works in a high-risk environment, the insurer can cancel the policy for breach of contract.
4. Is service tax/GST included in the refund amount?
A) No. When an insurance premium is refunded, the tax component (such as Service Tax or GST) originally paid to the government is generally non-refundable.
5. If the policyholder (the employer) dies, does the group policy continue for the employees?
A) Typically, in schemes where the policy is tied to a specific individual policyholder, the cover terminates upon their death. However, in most corporate setups where the “policyholder” is a legal entity (the company), the policy continues regardless of changes in individual leadership.
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.
