With a fast-changing employee benefits environment in India, Group Health Insurance has emerged as a pillar of workforce well-being. Employers, both startups and large corporations are spending a lot on providing extensive health cover as a way of attracting and retaining talents. Nevertheless, group health policies are dynamic in nature. Employees are added, dropped, promoted, or dependents are added to the employee coverage.
How do the insurers deal with these incessant changes without interfering with the policy?
The solution lies in a process known as endorsements, and more precisely, the endorsement scales, which dictate the way in which insurance policy premiums are adjusted when changes are made. Knowledge of these scales is vital to HR managers, financial departments, and even business owners who operate corporate group health plans.
This blog goes beyond the surface to understand what these endorsement scales are, what their purpose is, and how they affect the financial status of your organization- so that you can select the one that is most appropriate to your needs.
Sounds good? Let’s get going then!
Endorsements in Group Health Insurance Policies
An endorsement is simply a change or an addition made to a pre-existing insurance policy. The insurer or the policyholder (usually the employer in group insurance) can initiate it to indicate a change in the terms of the insured group or the policy.
Endorsements are widely used in Group Health Insurance due to the fluctuations in workforce. Employees can enroll or drop out in the middle of the year, families can be extended and coverage amounts can be changed. Rather than issuing another policy, the insurers use endorsements, which are formal amendments to the master policy, to document such changes.
Some common types of endorsements include:
- Addition or deletion of employees or dependents.
- Change in sum insured or coverage benefits.
- Correction of member details or dates of birth.
- Upgradation or downgrading of policy plans.
These endorsements directly affect the premium, which is recalculated based on the type of endorsement scale chosen in the policy.
Endorsement Scales: What Are They?
An endorsement scale defines how insurers calculate the premium for members added or deleted during the group health policy period. It’s essentially the formula used to determine how much premium will be charged (or refunded) when changes happen mid-term.
For instance, if a company adds an employee halfway through a Group Health Insurance Policy year, should the insurer charge for the full year or only for the remaining six months? The endorsement scale answers that.
Group Health Insurance providers use these scales to maintain financial fairness—ensuring neither party gains or loses unfairly when the policy is altered mid-term.
The choice of endorsement scale depends on:
- The insurer’s underwriting policy.
- The size of the insured group.
- Frequency of employee turnover.
- Administrative convenience desired by the employer.
Different Types of Endorsement Scales in Group Health Insurance
In India, insurers generally use three major types of endorsement scales to manage premium adjustments—Pro-Rata, Short-Period, and Full-Year Premium scales. Each has its reason, financial implication, and optimal application. We will get to know them in more detail.
Pro-Rata Endorsement Scale
Pro-Rata Endorsement Scale is the most popular and reasonable method of calculating mid term premiums. Within this system, the insurer rebates or pays the premium of the insured according to the actual number of days or months the cover is in force throughout the Group Health Policy period.
To take an example, when a policy is issued between January 1 and December 31, and an employee is joining on July 1, he will only pay a half- a- year premium or 50 percent of the yearly payment. In the same manner, when an employee quits in the middle of the year, a corresponding refund can be given for the remaining period (as per policy conditions).
Formula:
Premium Payable = (Annual Premium × Remaining Policy Days) ÷ 365
Advantages of the Pro-Rata Scale:
- Fair to both insurer and employer.
- Ideal for organizations with frequent staff changes.
- Simplifies Group Health Insurance premium reconciliation during renewals.
Example:
If the annual premium per employee is ₹10,000 and the employee joins on July 1, the premium charged would be ₹5,000 for the remaining six months.
This approach is particularly useful in large corporates or IT firms where hiring and exits occur frequently throughout the year.
Short-Period Endorsement Scale
The Short-Period Endorsement Scale works in a different manner. Rather than setting premiums based on the precise remaining duration, insurers use short-period rates based on a fixed table. These rates are marginally higher than the pro-rata rate in shorter periods as administrative expenses are constant even over short periods of coverage.
For example, if an employee joins for just three months before the Group Health Insurance policy expires, the insurer may charge 40% or 50% of the annual premium—not 25%—to cover administrative overhead and risk concentration.
Typical Short-Period Rate Table:
| Coverage Period | Premium Charged ( % of the Annual Premium) |
| Up to 1 month | 25% |
| Up to 3 months | 40% |
| Up to 6 months | 70% |
| Up to 9 months | 90% |
| Over 9 months | 100% |
Advantages of the Short-Period Scale:
- Protects Group Health Insurance providers from underpricing short-duration risks.
- Easy to implement using conventional rate tables.
- Efficient when the company has a large number of short-term contract workers or employees who work on projects.
Example:
When a 3-month addition takes place under a short-period scale, the insurer might impose 40 percent of the annual premium despite the fact that the coverage will not be in effect throughout the year, but only one-quarter of the year.
The model is generally applied to the industries that have contractual or seasonal workers like construction, logistics or event management.
Full-Year Premium Endorsement Scale
The Full-Year Premium Scale is the most conservative and simple approach. In this case, the whole group health premium is charged by insurers regardless of the time of employee joining in the policy year.
This implies that although an employee may come on board only two months before the renewal date of the Group Health Insurance Policy the insurer continues to receive a yearly premium. This also works vice versa–there cannot be a refund in case an employee leaves halfway through the year.
Advantages of the Full-Year Scale:
- Simplifies premium management—no calculations needed for additions or deletions.
- Eliminates disputes over partial coverage durations.
- Preferred by insurers for small groups (less than 50 lives) to maintain uniformity.
Drawbacks:
- Employers may feel it’s financially unfair, especially for late additions.
- May not suit large organizations with frequent personnel changes.
Example:
If an employee is added two months before renewal under this scale, the company still pays ₹10,000 for the full year’s coverage, even though the protection lasts only 60 days.
This model suits small businesses or associations with stable employee counts and minimal mid-term changes.
Other Endorsement Scales and Custom Variations
Beyond the three standard types, some insurers offer custom or hybrid endorsement scales for large corporates and multi-location organizations. These may combine elements of pro-rata and short-period scales for optimal flexibility.
For example, an insurer might apply a pro-rata scale for additions made in the first six months and a short-period scale for additions in the later half of the policy year.
Industry-specific variations are also common:
- Healthcare and IT companies often prefer pro-rata models due to frequent onboarding.
- Manufacturing or seasonal businesses may adopt short-period scales to manage temporary labor.
- Government-linked groups or associations may prefer full-year models for administrative simplicity.
Different Types of Endorsement Scales: A Tabular Comparison
| Endorsement Scale | Calculation Basis | Fairness Level | Administrative Ease | Ideal For |
| Pro-Rata | Actual number of days/ months | High | Moderate | Large corporates, dynamic workforce |
| Short-Period | Fixed rate based on duration | Moderate | High | Contractual or project-based organizations |
| Full-Year | Flat annual premium | Low | Very High | Small or static employee groups |
The table makes it clear—no single endorsement scale fits all. The right choice depends on the size, turnover, and nature of your organization.
Endorsement Scales: Regulatory and Practical Considerations
The Insurance Regulatory and Development Authority of India (IRDAI) allows insurers flexibility in structuring endorsement scales, as long as the method is transparent and disclosed in policy documents.
However, companies must ensure:
- All additions and deletions are communicated promptly to the insurer.
- Proper records and employee data (joining/leaving dates, DOBs, dependents) are maintained.
- Endorsements are processed within 15–30 days of change to avoid claim disputes.
- Premium adjustments (either payable or refundable) are settled in compliance with policy terms.
Neglecting timely endorsements can lead to claim rejections—especially if a new employee is hospitalized before being officially added to the insurer’s database.
How Endorsement Scales Affect Group Health Policy Premiums and Claims
The endorsement scale doesn’t just influence how much you pay—it also affects who gets covered and when.
For example, under a Pro-Rata Scale, if an employee joins mid-term, their coverage begins from the endorsement date and continues till policy expiry. Claims made within this period are fully valid.
However, in Full-Year Scale, even if the employee joins late, the coverage (once active) is treated as full-term, ensuring simpler claim administration for insurers.
Therefore, while Pro-Rata offers fairness in cost, Full-Year provides simplicity in claim handling.
How Endorsement Scales Affect Costs : A Case Study
Consider a company with 500 employees and an annual premium of ₹10,000 per employee. During the year, 50 employees join mid-term (after six months).
- Under Pro-Rata Scale, premium = ₹10,000 × 50 × 0.5 = ₹2.5 lakh.
- Under Short-Period Scale, assuming a 70% rate = ₹10,000 × 50 × 0.7 = ₹3.5 lakh.
- Under Full-Year Scale, premium = ₹10,000 × 50 = ₹5 lakh.
The difference between pro-rata and full-year scales is ₹2.5 lakh—a significant impact on corporate budgets. Therefore, the selection of the appropriate endorsement approach directly affects the overall employee benefits cost.
Choosing the Right Endorsement Scale for Your Business
There’s no universal rule here. Nonetheless, businesses can make decisions in the following manner:
- Full-Year Scale is simple to use for startups and SMEs with limited staff movement..
- Short-Period Scale can be applied in the case of middle-sized firms with moderate changes.
- Pro-Rata Scale should be employed by big companies or MNCs in order to be fair and accurate.
Insurance brokers and advisors may assist in reviewing workforce trends, claims, and renewal periods to suggest the most productive endorsement structure.
Final Thoughts:
The term ‘endorsement scales’ can be technical- sounding, but they provide the foundation of cost control and transparency of operations in Group Health Insurance policies. They provide fairness between insurers and employers by determining how premiums vary when there are mid-term changes.
These scales, Pro-Rata, Short-Period, and Full-Year, are not merely a compliance requirement but strategic tools by which HR and finance professionals can efficiently manage employee benefits.
On a busy business landscape with mobility in the workforce is the order of the day, the correct endorsement scale can be the difference between a well-managed health plan and a budgetary liability. Make the right decisions, remain within the line, and keep your team safe without spending too much.
