How are Group Health Insurance Premiums Calculated?

  • Author :
  • TATA AIG Team
  • Published on :
  • 13/03/2024

Offering a comprehensive solution to the financial worries of a particular group of people, preferably employees of a specific company, might feel like a lot. Well, quite frankly, it is a lot.

But not if we have efficient and capable tools such as employee health insurance plans for all shapes and sizes of companies.

We can consider employee or group medical insurance as the cornerstone of employee benefits. It is an effort for the collective; it is inclusive and covers a vast area of concern. The group health insurance covers various areas and hence is influenced by various components of the group as well.

First, let us understand the areas that a group health insurance covers and then let us dive into the factors that influence the policy premium amount.

Group Health Insurance Policy

A group health insurance offers a policy for a group of people to protect them from the financial risks that accompany health issues, hazards, and conditions. However, there are various areas of effect when it comes to a group health policy.

The policy provides coverage for individual employees, their treatments and pharmacy expenses, has provisions for providing loss of income in the form of convalescence benefits, and covers the treatment of immediate family.

This leads us to the understanding of the insurance premium calculation because the group insurance premium is apportioned on the basis of various factors related to the group.

Factors That Affect The Group Health Insurance Premium

Try and understand these components and how they determine or affect the policy premium amount.

Once you understand these factors, you can use the group health insurance premium calculator to find the ideal premium amount by customising the plan.

Insured Value

The insured value is also known as the sum assured or policy limit. This term refers to the maximum limit of the amount the insurance company will pay as a claim for an employee that falls under that group's health insurance.

This is a highly influencing factor since the group insurance scheme calculation for the premium of the policy is directly proportionate to the insured value.

If the sum assured is high, the premium will be high compared to a lower insured valued plan.

Riders and Add-on Features

There are numerous features available with the policy that you can add to your standard scope of coverage. These additional features are called add-ons or riders. Features like family cover, convalescence benefits, consumables cover, preventative healthcare, etc., are some of the significantly preferred add-ons.

If the employee adds these riders to their policy, their premium will increase accordingly. But the return outweighs the cost, so it is worth the increase.

The plan can be customised by comparing premiums of different combinations of add-ons using a group medical insurance premium calculator. This will assist in finding the best fit for the company or a concerned employee.

Claim History

Claim history comes into the discussion at the time of the renewal of the policy with the same insurer. The insurance provider will verify the claim history of the concerned policy in order to settle on an amount for the policy premium.

If there are numerous claims made during the policy period, the renewed policy premium will be marginally higher. This is because they lose the benefit of economies of scale.

Employees’ Average Age

Before issuing the group health insurance policy to a company and assigning a premium amount, the insurer calculates the average age of the concerned group of people.

This is important because the age of the employees determines their risk of catching illnesses. Although it is a generalisation, it is a data-backed consideration and, hence, cannot be challenged.

If the group’s average age is higher, the policy premium amount will be high. If the group’s average age is lower than that, the policy premium amount will be lower. Hence, the premium amount is directly to the average age of the group as well.

Scope Of The Coverage

As per the choice of an employee or the group as a whole, the scope of coverage might change. If the coverage includes convalescence benefits along with family cover, the policy premium amount will be assigned accordingly.

If these coverages are excluded, and only the employees are covered, the assigned premium will be lower.

Find the best-suited combination of coverage and add-ons with the help of a medical insurance premium calculator. That way, comparing and finding a compatible group health policy becomes feasible.

Nature Of The Occupation

The nature of the occupation is of noteworthy influence on the policy premium. Some jobs have a higher level of risk associated with it, while others are comparatively less risky. The premium will differ accordingly.

If the nature of the job is too grave, the policy premium is going to be high as compared to the less precarious jobs. Hence, we can say that the premium is directly proportional to the level of risk associated with the job.

Understanding such nuances becomes important in order to make informed choices while picking the perfect fit for the company’s well-being. Since numerous factors come into play while calculating the premium, the process is complex.

Unified Wellness With Group Health Insurance

Implementing a proactive health and wellness initiative like a group medical insurance policy will promote good health, a healthy lifestyle, and a good company culture among your company’s employees.

This type of commercial insurance, along with various SME insurance plans, focuses on providing financial protection for comprehensive healthcare.

Buying a customised group health policy for your company is like offering a healthy and nurturing work environment to your employees.

Ending Note

The unified wellness offered by your group health insurance is an inclusive and robust solution for the overall financial protection of your employees.

Reaching the result of the policy premium amount is a very complex interplay of different components. Once you understand the key influencers, you can customise the plan and turn it into a profitable protection policy for your company’s employees.

While the abovementioned factors influence the premium, choosing a sensible brand of insurance provider is also important. The quality of services and completion of promises is paramount regarding group insurance policies. Use a group insurance premium calculator to find the perfect fit for your company!


Can the size of a group impact the premium amount of group health insurance?

Yes! If the size of the concerned group is large, the premium amount will be reduced since these groups benefit from the economies of scale. Whereas a smaller group might face a higher premium amount.

What role does the demographic of a company play in the group insurance premium amount?

The demographic of the group, i.e., the gender and age of the group, makes a lot of difference in the premium. Older groups might be allocated with higher premiums as compared to the younger groups. Likewise, the demographics will determine the premium amount according to the risks they pose to the insurance company.

Is a group health insurance policy cost-effective?

A group health insurance policy is highly cost-effective as well as cost-efficient with all the features and functions it provides when needed.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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