What are the types of endorsement scales in group health insurance?

When you think about customising your group health insurance, endorsement scales come into play. They help define how the sum insured changes during the policy period, based on enrolments and deletions. Let’s discuss endorsement scales and why they matter.

What is an endorsement scale?

An endorsement scale is a framework or method used to adjust the insured sum or members in a group insurance policy. This usually applies to group health plans offered by employers to their staff or organisations to their members.

These changes occur through additions (like new employees joining) or deletions (like employees exiting). The scale helps determine whether the premium needs to be recalculated and, if yes, how it’s done.

Why do endorsement scales matter in group insurance?

Here’s why the scales are important:

  • Offer clarity on premium adjustments during the policy term.
  • Help insurers and policyholders avoid disputes.
  • Provide transparency and fairness in group health insurance

Understanding these scales can help HR teams or insurance buyers make better decisions.

Types of endorsement scales in group health insurance

Let’s look at the four primary endorsement scales commonly used:

  1. Pro-rata endorsement scale

This is the most widely used and simple method.

How it works:

  • The premium is calculated proportionally to the remaining policy duration.
  • If someone is added mid-term, the cost is adjusted for the days left.
  • Similarly, a refund is calculated if someone is removed.

Example: If your policy costs ₹25,000 annually and an employee joins in month six, you’ll be charged only for the remaining six months.

Best for:

  • Dynamic organisations with frequent employee movement.
  1. Short-period endorsement scale

Here, instead of a proportionate calculation, insurers use a fixed percentage based on a defined table.

How it works:

  • Premiums are decided based on short-period rate tables.
  • These tables list rates depending on how many months are left.
  • The refund on deletions is also subject to the same scale.

Example: If the table says 60% of the premium applies for six months, then even if half the year is left, you pay 60%, not 50%.

Best for:

  • Policies with predictable member changes.

Note: Refunds are usually lower than the initial charge.

  1. Minimum premium scale

This method ensures that the insurer receives a fixed minimum premium.

How it works:

  • A minimum amount is guaranteed to the insurer, even if members are deleted.
  • Additions can increase the premium, but deletions won’t reduce it below the minimum.

Example: Suppose the minimum premium is set at ₹1,00,000. Even if many employees exit, you still pay at least that amount.

Best for:

  • Stable groups where deletions are minimal.
  • Employers seeking predictable costs.
  1. No refund on deletion scale

This is the strictest endorsement type.

How it works:

  • Premium is charged for every addition.
  • No refund is offered if members leave the group.

Example: An employee leaves after three months, but you are not refunded the premium.

Best for:

  • Groups where deletions are rare or insignificant.
  • When budgeting is based on the total enrolled count at the start.

How to choose the right endorsement scale?

There is no one-size-fits-all. The best endorsement scale depends on your organisational structure and employee turnover.

Ask yourself:

  • Do employees join or leave frequently?
  • What level of flexibility is required?
  • Do you want predictable budgeting?

You can also consult your insurer to tailor a suitable plan.

How does it impact your premium?

The endorsement scale determines how much additional premium you pay or how much refund you may receive. Some scales are generous with refunds, while others are not.

If not understood well, it can lead to:

  • Overpaying for members who exit
  • Budget mismatches
  • Unexpected bills

That’s why it is critical to review this clause before signing the group health policy.

Tips to manage endorsement scales better

Keep these points in mind when handling group policies:

  • Track changes: Maintain a live list of members covered.
  • Update the insurer timely: Inform about additions or deletions promptly.
  • Review premium statements: Match endorsements with actual changes.
  • Communicate: Keep all stakeholders informed.

This avoids overpayment and ensures employees get their rightful coverage.

Conclusion

Understanding endorsement scales in group health insurance can save you money and reduce administrative headaches. Whether you opt for pro-rata or no-refund, each method has its advantages and limitations. Choose the type that aligns with your team structure, budget and predictability needs.

The post What are the types of endorsement scales in group health insurance? appeared first on Daily Excelsior.

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