Introduction
Small and medium enterprises (SMEs) are the backbone of India’s economy. But one big challenge they face is retaining skilled employees in a competitive market. Offering group health insurance has now become an effective way for SMEs to take care of their workforce, boost loyalty, and comply with evolving HR practices.
This guide explains everything SMEs need to know about group health insurance in 2025 — from benefits and costs to IRDAI rules.
What is Group Health Insurance for SMEs?
- Definition: Group health insurance is a single health policy that covers all employees of an SME under one plan.
Example: A Jaipur-based SME with 50 employees buys one group policy. Each employee (and sometimes their family) gets medical coverage under the same plan. - Purpose: To provide affordable healthcare protection, reduce employee stress, and make the company more attractive for hiring.
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Read the Complete Group Insurance GuideWhy SMEs Should Offer Group Health Insurance
- Employee Retention & Loyalty
In 2025, job hopping has become common. Health insurance is a key perk that improves employee satisfaction and reduces attrition. - Affordable Premiums
Compared to individual policies, group plans are cheaper per employee because the risk is spread across the group. - Tax Benefits
Premiums paid by SMEs can be claimed as a business expense under the Income Tax Act, reducing the company’s taxable income. - IRDAI Push
Regulators encourage SMEs to provide group cover, especially after the COVID-19 experience. Many state governments also promote health benefits for workers.
Benefits for Employees
- Cashless Hospitalization: Access to network hospitals without upfront payments.
- Family Coverage: Many group policies allow optional spouse and children cover.
- Pre-existing Conditions Covered: Unlike retail plans, group plans often cover pre-existing diseases from day one.
- Mental Health & Wellness Add-ons: In 2025, wellness programs, mental health counseling, and OPD benefits are included in many SME plans.
Cost of Group Health Insurance for SMEs in 2025
| Company Size | Average Annual Premium (per employee) | Coverage Offered |
|---|---|---|
| 10–20 employees | ₹7,000 – ₹10,000 | ₹2–3 lakh cover |
| 20–50 employees | ₹6,000 – ₹8,000 | ₹3–4 lakh cover |
| 50–100 employees | ₹5,000 – ₹7,000 | ₹4–5 lakh cover |
Premiums vary based on employee age, industry risk, and add-on features.
IRDAI Guidelines for SMEs in 2025
- Transparency: Insurers must clearly disclose inclusions/exclusions in SME group policies.
- Digital Issuance: Policies are now issued digitally for faster onboarding.
- Wellness Programs: IRDAI encourages inclusion of preventive health and mental wellness support.
- Claim Ratios: Insurers must maintain healthy claim settlement ratios for group plans.
Future of SME Group Health Insurance in India
- Tech Integration: Digital dashboards for SMEs to manage employee policies.
- Custom Plans: Tailored covers for startups, IT companies, and manufacturing units.
- Wellness + Insurance Bundles: More focus on preventive healthcare.
- Increased Adoption: By 2030, most SMEs in urban India are expected to offer health coverage.
Group health insurance is no longer just for big corporates. In 2025, SMEs across India are adopting it as a smart investment in their employees’ well-being and their own long-term growth.
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