Employer group insurance: a strategic advantage for employee retention and business strengthening
05.06.25
8
Minutes
Katrin Straub
Managing Director at nextsure
Are you, as an employer, looking for effective ways to motivate your team while also delivering business benefits? Employer group insurance can play a central role here by offering valuable additional benefits and sustainably increasing your employees’ loyalty. Find out more about the many options and the specific benefits for your business.
The topic in brief and concise terms
An employer group insurance scheme significantly strengthens employee loyalty and sustainably improves the company’s image.
Premiums for group insurance, such as accident insurance, are often tax-deductible as business expenses and can be taxed at a flat rate.
There are various types of group insurance, including company health insurance and group accident insurance, which can be tailored to specific company needs.
Creating added value: The dual benefits of group insurance for companies and employees
A group insurance scheme strengthens your business on several levels. Employers benefit from improved employee retention and a positive company image. In addition, contributions to group accident insurance can reduce the tax burden as business expenses. For employees, this often means access to insurance cover with premiums up to twenty-five per cent lower. Many policies are even arranged without an individual health assessment. Example: A medium-sized company with one hundred and fifty employees introduced company health insurance. Within a year, a measurable increase in employee satisfaction of ten per cent was recorded. These positive effects underline the strategic value of such instruments. Implementation can increase employer attractiveness many times over. Find out more about the benefits of company health insurance. Choosing the right type of insurance is crucial to success.
Designing tailored protection: An overview of common types of group insurance
The landscape of group insurance is diverse and offers suitable solutions for a wide range of needs. One of the most popular models is corporate health insurance (bKV). It gives employees access to additional benefits such as treatment by a consultant or a single room, often with coverage of up to 100% for certain treatments. Another important pillar is group accident insurance (GUV). This provides financial protection in the event of accidents, around the clock – including in leisure time, where eighty per cent of all accidents occur. Companies can benefit from GUV tariffs for as few as two insured persons. For provision in retirement, company pension provision (bAV) is a related and important instrument that is often considered in combination. When making a selection, a needs analysis within the company, which includes at least the number of employees and the desired areas of cover, is essential. Many providers require a minimum of twenty insured persons for a group policy. The exact terms and costs depend on many factors.
The most important types of group insurance for employers:
Corporate health insurance (bKV): Often offers more than fifty different additional benefits.
Group accident insurance (GUV): Fills the gap left by statutory accident insurance, which only applies to accidents at work and on the commute.
Collective occupational disability insurance: Protects income in the event of long-term illness or the consequences of an accident, often with simplified medical underwriting for at least ten employees.
Collective term life insurance: Provides financial security for dependants, often available from as few as five insured persons.
These options show the breadth of ways employers can demonstrate care. Next, we take a closer look at the financial aspects.
Calculating costs: financing models and contribution design for group insurance policies
The cost of group insurance varies considerably and depends on several factors. The key factors are the chosen scope of benefits, the number of employees insured and the risk profile of the group. A company with fifty office-based employees will receive different terms than a trades business of the same size. Financing can be structured flexibly. Fully employer-funded models signal a high level of appreciation. Employee-funded options make use of the favourable group rates, with the employee covering the contributions themselves, often via salary sacrifice. Mixed models, in which employer and employee share the costs, are also common and can increase acceptance by up to fifty per cent. A simple group accident insurance policy can, for example, be available from as little as five euros per employee per month. A detailed overview of which insurances the employer pays for helps with budget planning. The tax treatment of these contributions is another important aspect for employers.
Make the most of tax advantages: group insurance as a business expense and flat-rate taxation
Group insurance policies not only provide protection, but also interesting tax planning opportunities for employers. Contributions made by the employer for a group accident insurance policy can generally be claimed as business expenses. This reduces the company’s taxable profit. Since 1 January 2024, flat-rate taxation of contributions to group accident insurance at 20% payroll tax has been possible regardless of the contribution amount. Previously, a limit of EUR 100 per year and employee applied. This new rule offers significantly more flexibility. However, the application of the EUR 50 non-cash benefit exemption is often excluded for group accident insurance policies where the option of flat-rate taxation under Section 40b(3) of the EStG exists. This applies regardless of whether the employer actually makes use of the flat-rate arrangement. Our expert tip: A careful review of the tax treatment of each individual policy by a tax adviser is essential in order to make full use of all benefits and avoid pitfalls. This ensures compliance and maximises savings. Knowledge of the deductibility of direct insurance policies may also be relevant here. In addition to the tax aspects, the legal framework must also be observed.
Act in legal compliance: keep contract drafting and regulatory requirements in view
Implementing group insurance requires compliance with certain legal requirements. The policyholder under the group contract is the employer. The employees are the insured persons and usually have a direct claim to benefits against the insurer. This was clarified once again by BaFin Circular 03/2021, which requires such a direct claim for genuine group insurance contracts. Employers also have duties to inform their employees about the insurance cover; these must include at least the essential contractual terms. As a result of a CJEU ruling and the European Insurance Distribution Directive (IDD), the employer may in some circumstances itself be classified as an insurance intermediary, which entails further obligations. This particularly applies to situations in which the employer receives remuneration for arranging the insurance. The minimum number of employees to be insured varies depending on the insurer and product. It is often twenty people, while for some products such as Allianz group accident insurance, as few as two employees are sufficient. Many companies underestimate the complexity of distinguishing between genuine and pseudo group insurance, which has different legal consequences. Clear contract drafting is crucial here. The importance of occupational pension provision and its legal foundations is a related area. The next step is to select the right solution and implement it successfully.
Checklist for the legally compliant introduction of group insurance:
Status check: Is it genuine or pseudo group insurance?
Contract terms: Ensuring the insured employees have a direct claim.
Information duties: Complete and comprehensible information for employees about the insurance cover (at least once a year).
Data protection: Compliance with the GDPR when processing employee data.
Intermediary role: Clarify whether the employer acts as an insurance intermediary and whether the relevant authorisation requirements apply (often when there is a financial stake).
Equal treatment principle: Observe the General Equal Treatment Act (AGG) when selecting the eligible employee groups.
These points help avoid pitfalls. The next step is selection and implementation.
Implement strategically: Select the right group insurance and embed it within the company
The selection and introduction of a group insurance policy should be carefully considered in order to achieve the maximum benefit for everyone involved. Start with a thorough needs analysis: what specific objectives are you pursuing? Is the primary aim employee retention, promoting health, or covering specific risks? Define clear metrics so that success can later be measured, for example a five per cent reduction in days lost to sickness. Then compare the offerings of different insurers. Pay attention not only to the price, but also to the scope of benefits, the flexibility of the tariffs and the quality of service. Clear and understandable communication of the benefits to employees is crucial for acceptance; information events or a dedicated intranet page can help here. The administrative burden for the company should be kept as low as possible. Modern insurers offer digital portals and personal contacts, which can reduce the effort by up to seventy per cent. Our expert tip: Seek independent advice. At nextsure, we analyse your specific situation and work with you to find the optimal group insurance solution, precisely tailored to the needs of your company and your employees. A well-thought-out company pension scheme can also be worthwhile and round off the overall package. Request an individual risk analysis now: Have your insurance situation reviewed free of charge and receive concrete suggestions for improvement.
More useful links
Wikipedia offers a comprehensive overview of group insurance in Germany.
The Federal Ministry of Labour and Social Affairs (BMAS) provides information on its website about occupational pensions.
The German Pension Insurance provides a brochure on occupational pensions.
The Federal Statistical Office (Destatis) offers tables on the structure of labour costs and ancillary wage costs.
The Federal Ministry of Health provides information about workplace health promotion.
Rehadat Statistics provides statistics on workplace health promotion from the GKV Prevention Report.
Gallup publishes the report on the Engagement Index Germany.
WTW highlights in an article how benefits influence employee retention and recruitment across generations.
The IHK Munich offers information on the tax aspects of occupational pension provision.
The Hans Böckler Foundation provides a study on voluntary employee benefits.
FAQ
How many employees are required at minimum to take out group insurance?
The minimum number varies depending on the insurer and the type of group insurance. The lower limit is often around ten to twenty employees. Some providers, such as Allianz for group accident insurance, already make this possible from as few as two people.
Can a group insurance policy taken out by the employer be cancelled?
Yes, the employer, as the policyholder, can terminate the group insurance contract by observing the contractually agreed notice periods. For the insured employees, there are often provisions for continuing cover, for example in the form of an individual policy, usually on different terms.
What happens to the insurance cover under a group insurance policy when an employee leaves the company?
When an employee leaves the company, their insurance cover under the group contract usually ends. However, many policies include a continuation right, allowing the departing employee to continue the insurance privately, often without a fresh health assessment, but at adjusted premiums.
Are the benefits from group insurance tax-free for the employee?
Benefits from group accident insurance are generally tax-free for the employee. For other group insurance policies, such as company health insurance, the contributions paid by the employer may be treated as a benefit in kind for the employee and be subject to income tax and social security contributions, provided exemption thresholds (e.g. the fifty-euro non-cash benefit exemption limit) are exceeded.
What administrative effort does the employer have with a group insurance policy?
Modern group insurance contracts are often designed so that the administrative burden for the employer is low. Many insurers offer digital administration portals and dedicated contacts. The effort is usually limited to registering and deregistering employees as well as paying contributions.
Do small businesses also benefit from group insurance?
Yes, even smaller companies can benefit significantly from group insurance. It enhances their attractiveness as an employer and employee retention. Some insurers already offer solutions for companies with as few as two or five employees, giving even small businesses access to the benefits.
