For many businesses in Pakistan, employee health insurance remains more of a “nice-to-have” than a strategic necessity. While organizations in formal sectors like banking, telecom, and tech have made it part of their HR culture, a majority of small and medium enterprises (SMEs) still avoid offering group health insurance. The hesitation is understandable, but it represents a missed opportunity for business growth and talent retention.
As an entrepreneur or HR decision-maker, understanding why so many companies resist this benefit and what can be done to change that mindset can help build a stronger, more sustainable organization.
The Common Reasons Employers Avoid Group Health Insurance
1. Perception of High Cost
The first and most common concern is affordability. Many employers believe that group health insurance will strain their cash flow or require large upfront commitments. This perception often arises from outdated assumptions about traditional insurance models, with rigidly structured annual premiums and benefits.
However, today’s market has evolved. Platforms like SmartBenefits have introduced flexible group health insurance solutions tailored for SMEs, allowing employers to start with smaller groups, scale as they grow, and manage premiums more efficiently. The real challenge is no longer cost — it’s awareness.
2. Lack of Awareness and Guidance
Many business owners in Pakistan’s SME sector also don’t know where to start. Many do not have HR teams with the experience or time to explore employee benefits or understand how to compare coverage plans. This makes the process seem complex and risky.
A good starting point is understanding what group insurance actually covers — and how it helps reduce long-term business risks. For instance, medical claims under a group policy can prevent unplanned salary advances or absenteeism due to illness, both of which can impact productivity. Employers can explore more about how group insurance is structured and its practical advantages in our blog Know Why Your Company Needs Group Health Insurance.
3. Preference for Short-Term Savings
In fast-moving businesses like startups and small firms, leaders often focus on short-term financial stability. They focus spending on immediate business growth, marketing, technology, or expansion, rather than employee benefits with their delayed returns.
But this mindset can backfire. High employee turnover, low morale, and reduced engagement cost far more over time than an insurance premium. Health benefits act as a long-term investment in people, improving retention and building trust within teams.
4. Limited Customization Options in the Past
Until a few years ago, most insurance companies offered rigid plans suited for larger corporations. SMEs found themselves excluded or offered packages with minimum headcount requirements. The industry is now much more flexible, thanks to digital insurtech platforms that focus on inclusivity and flexible coverage.
Employers can select coverage tiers, add dependents, or include outpatient benefits without complex paperwork. This level of customization allows even smaller organizations to extend meaningful protection to their employees.
5. Misconceptions About Claim Complexity
Another concern among employers is the fear of complicated claims handling. Many assume their employees will face delays or confusion when filing claims, leading to dissatisfaction instead of appreciation.
With technology-driven providers, claim processing is now streamlined. Employees can file claims digitally, track progress, and receive assistance throughout the process from dedicated support teams.
Employers can also monitor claim trends to make data-driven decisions about renewals or adjustments in coverage.
The Penalties of Not Having Group Health Insurance
Avoiding group health insurance can seem to be a cost reduction in the short term, but it creates hidden risks that affect a business’s performance and reputation.
Without coverage, unexpected medical emergencies can cause absenteeism, productivity loss, and even employee turnover. Moreover, in competitive industries, companies that fail to offer essential benefits find it harder to attract top talent.
In contrast, organizations that invest in group health insurance report better engagement and loyalty. It sends a clear message that leadership values its workforce beyond their daily output — a message that resonates deeply with professionals, especially younger generations entering the workforce.
How Employers Can Change This Mindset
1. Start Small but Start Now
Employers don’t need to insure hundreds of employees at once. It’s better to begin with a small group, understand the process, and expand gradually. Many insurers allow businesses to customize their plans, making it easier to test what works best for their teams before scaling up.
2. Treat Health Coverage as a Strategic Asset
Instead of viewing insurance as an expense, think of it as a tool for risk management and brand value. Employees who feel secure are more motivated, perform better, and become ambassadors for your company’s culture. For SMEs looking to compete with larger firms, a well-designed benefits package can level the playing field.
3. Partner with the Right Provider
Choosing a partner that understands the unique challenges of Pakistani businesses is key. Look for transparency, flexibility, and digital support. Providers who specialize in SME-focused insurance can guide employers through every stage — from policy selection to claims handling.
Employers can read more about innovative models and challenges in group coverage in our blog, Bringing Group Health Insurance to the Informal Sector: Challenges and Opportunities in Pakistan, which also highlights how inclusive models are reshaping access to healthcare benefits across different workforce segments.
4. Create Awareness Within Your Team
Introducing group insurance shouldn’t be a top-down decision alone. Employees need to understand how the coverage benefits them and how to use it effectively. Hosting short onboarding sessions or sharing FAQs from the insurance partner helps build confidence and appreciation.
5. Measure Impact and Share Results
Once implemented, employers should regularly track the impact of health insurance on employee engagement and turnover. Sharing results internally reinforces its importance and helps justify continued investment. Over time, these efforts strengthen your employer brand and improve your position in a competitive job market.
The Bottom Line
For Pakistani employers, especially SMEs, offering group health insurance is no longer just a compliance or goodwill gesture, it’s a strategic move that enhances business resilience. The barriers that once made insurance inaccessible have largely been removed by modern insurtech platforms that simplify enrollment, claims, and customization.
As an entrepreneur or HR leader, the question is no longer whether you can afford to provide group health insurance, but whether you can afford not to. A healthier workforce is a more productive and loyal one, and in today’s business environment, that’s a competitive advantage worth investing in.
Sadia Zaheer holds a Masters in Business Administration from IBA, Karachi. After working in several financial institutions in Client Management, Corporate Lending, Islamic Banking and Product Management she jumped careers to pursue a career in writing.
She is a Finance, Business and HR Development writer with four years of experience. She reads a lot and takes care of her multiple cats to remain calm.
