Group policies account for nearly 60% of total health insurance premiums. For general insurers, group health makes up about 74% of their health portfolios. For standalone health insurers, the share is much lower, around 23–24%. Despite this scale, group health is often treated as a secondary business, even though its economics shape the industry’s long-term viability.
The two segments operate on very different cost structures. Group health typically carries higher loss ratios but lower intermediation costs. In contrast, retail health has lower loss ratios and significantly higher acquisition and servicing expenses. Insurers therefore need a balance between retail and group business to keep portfolios stable.
Predictable, mispriced
Within group health, employee benefit business is the most predictable. Policies are usually comprehensive, with coverage for pre-existing diseases and maternity and no waiting periods. Pricing is based on historical claims data, trend analysis, medical inflation, and other observable factors. Crucially, employee group health is experience-rated, allowing each policy to be priced independently and renewed annually.
Problems arise when insurers deliberately under-price expected claims, often to meet short-term growth targets or to support broader client relationships. In a deregulated market, this weakens risk discipline and erodes sustainability.
Group health also includes sub-segments such as bancassurance (credit-linked covers, micro-insurance) and government-sponsored schemes. Government tender business, typically disclosed separately, tends to show adverse experience. Bancassurance, by contrast, often has low loss ratios. Insurers with large, profitable bancassurance books frequently use those profits to offset weaker employee benefit results.
A better approach is straightforward: every segment should stand on its own economics. Retail, employee benefits, bancassurance, and government business should each be priced on their own risk characteristics, without cross-subsidization.
Market practice, however, often runs the other way. Retail premiums are rising sharply and frequently, drawing public scrutiny. At the same time, large parts of group business continue to be priced irrationally low.
Costs catch up
In corporate group health, advice to expand coverage while simultaneously cutting premiums is especially damaging. Claims in this segment are predictable, and service quality matters more than marginal price differences. When companies switch insurers but retain the same intermediary or TPA, it often signals a search for cheaper premiums rather than better risk management.
That strategy eventually backfires. Loss ratios deteriorate, insurers push back, and employers face steep corrections. The result is reduced benefits, higher employee contributions, or withdrawal of certain covers, hurting the very workforce the programme is meant to protect. Sustainable solutions require insurers, intermediaries, corporate advisers, and employers to jointly design benefit structures that balance affordability with long-term viability.
Experience within group health varies by geography, employee profile, and benefit design. Coverage is also expanding beyond hospitalization to OPD, wellness, and preventive care. These additions demand not only stronger analytics and pricing capabilities but also robust provider network management.
Despite its size, group health attracts relatively few social media complaints. Policies are comprehensive, repudiation rates are low, and most disputes relate to deductions under “usual, customary and reasonable charges” or interpretation of modern treatment coverage. Since the employer is the policyholder, grievances flow through HR, brokers, and insurers and are usually resolved before becoming public.
Group health is also central to hospital economics. With roughly 60% of health insurance premiums coming from group policies and with higher claim frequency, this segment shapes insurer and TPA negotiations with providers.
Looking ahead, group health will only grow in importance. Employers increasingly recognize that comprehensive coverage is a key tool for attracting and retaining talent. Many also extend cover to employees’ parents, individuals who may find retail insurance unaffordable or unavailable due to age or medical history.
Employees must use insurance responsibly. But the heavier responsibility lies with insurers and intermediaries to guide employers toward sustainable designs, supported by strong data analytics, fraud detection, and disciplined underwriting.
Insurers should avoid a model that wins business through irrational pricing and then compensates by restricting claims. The industry’s credibility depends on consistent pricing and reliable claims outcomes.
India today largely operates on fully insured group contracts. Regulators could consider enabling additional structures, such as experience-adjusted contracts, profit-sharing arrangements, or insured ASO models, to align incentives and promote self-sustaining employee benefit portfolios.
As regulation tightens to protect individual policyholders, the stability of group health will become even more critical. The industry’s task is clear: grow group health profitably, price it rationally, and treat it as the strategic core of India’s health insurance system, not as a loss-leading side business.
Shreeraj Deshpande is an independent insurance consultant.
