Employees covered by death benefits, long-term disability income and critical illness increased again in 2023 as the group risk employee protection market continues to expand.
Challenging economic conditions, such as high inflation, interest rates and costs, the highest number of company insolvencies since the financial crisis of 2008 (6,788 in Q4 2023) and a technical recession at the end of the year, all failed to reduce overall employer demand for group risk benefits.
Figures from Swiss Re’s Group Watch 2024 report showed that employees covered by group risk policies increased by 6.2 percent from 14,421,387 in 2022 to 15,314,655 in 2023.
The number of employer group policies increased by 5.1 percent from 87,376 to 91,796.
Within this total, critical illness cover (CI) had grown the most by 10.2 percent, while death benefits increased 5.2 percent and long-term disability income (LTDI) grew 3.2 percent.
Swiss Re’s report included research with benefits providers and consultants about their perceptions of how the economy had impacted workplace benefit provision.
A number of consultants said employers had experienced little difference from previous years, with one consultant commenting: “Not as much (of a decline) as the doomsday merchants predicted.”
However, the research also found that employers are scrutinising their group risk benefits more closely and examining potential cost savings.
Data also showed changes to the duration of maximum benefit payment periods for LTDI and the acceleration of closure of the remaining dependants’ death in service policies.
“We had more clients asking for benchmarking to see if they could make changes to their schemes. Also more enquiries about voluntary schemes, especially from industries that traditionally offer these benefits to a limited number of employees, e.g. hospitality,” said one consultant.
Cost savings
The increasing cost of cover was another key talking point, with rises in the cost of private medical insurance (PMI) of particular note. The report said that while PMI was outside the scope of its research it was relevant because it “impacts overall employer spend and can, in turn, drive decisions around eligibility and benefit design”.
One provider told the report: “Our sense is that demand amongst SMEs has dropped during the last 18 months, and this is no surprise given the economic climate. Clients are still enthusiastic if a premium saving from switching provider is available, but I wouldn’t say this has materially changed buyer behaviour. Some clients will switch for small savings, others not. I am aware of more focus and attention on the healthcare market at present, with clients often facing large premium increases, group protection therefore provides a chance to offset some of that increase, and that’s the general approach I am seeing from intermediaries and clients.”
The trend for employees having more influence over what protection they and their families may need rather than accepting a standard benefits offer was also recognised.
Researchers said some providers and consultants they spoke to said employers were moving away from group risk benefits being contractual although they had not removed them.
“I think employers are looking for ways in which they can consolidate benefits for savings, and tweak coverage to reduce costs rather than removing provision completely. They are also looking to insurers to provide ancillary benefits to save them sourcing separately at greater cost,” one said.
“I’m seeing more schemes moving away from a higher core benefit and hence employer spend and implementing flex so that if an employee wants to retain that higher benefit, they have to pay for it themselves. For those lucky to get a pay rise, it may not be as good as they had hoped due to budget constraints, hence resulting in lower increases in benefits than expected,” another reported.
Impact of consumer duty
The influence of the first stage of the Financial Conduct Authority’s Consumer Duty implementation is evident with a rise in training, internal process reviews and the requirement to work with third parties. Stage two of the duty will come into force from July 2024.
One provider explained: “With group protection largely exempt, most of our focus has been on individual protection and all customer (employee) facing service teams, such as claims and medical underwriting. We’ve also done a lot of work to improve customer communication and product literature.”
Another provider said: “The consumer duty is fully embedded in our firm; it’s changing the language we use and strengthening the need to keep the customer at the heart of everything we do. This is a journey, and I expect in a few years we’ll be in an even better place than we are now.”
Clare Lusted, head of product proposition at Unum UK, said: “It’s great to see employers recognising the value group risk products offer, which includes the positive impact their added-value services have on employee wellbeing, productivity and resilience.
“By complementing the strong financial protection these products provide, the growing range of holistic health and wellbeing support providers in this space offer are understandably an attractive proposition for employers seeking to foster a culture of care and enable their workforces to thrive within businesses large and small.
“We know that our innovative solutions such as unlimited mental health support, remote GPs and first-class in-house vocational rehabilitation team are helping to keep employees happy, healthy and in work as well as easing the pressure off the NHS with high quality services covering both prevention and reactive intervention.”
Lusted highlighted the call for the industry to streamline its language to resonate better with employers. She said this emphasised the importance of simplifying communications around group risk benefits.
“At Unum, we have already been striving to simplify the language we use to communicate with our customers to ensure optimised accessibility, engagement and alignment for all.”
Katharine Moxham, spokesperson for Grid, commented: “It’s excellent news that in 2023, the number of people covered by the industry increased by 893,268, making group risk benefits some of the most popular employee benefits offered by companies. The number of employees insured under group risk policies (15.3 million) now exceeds half the payrolled population which is a step-change in itself given the steady increase in employment to higher than pre-pandemic levels.”
Moxham added: “Interestingly, the report also highlighted the topic of the language the industry uses to explain and promote group risk, with calls for this to be made clearer. It’s therefore key for communications around group risk benefits to be simplified so that people who work outside the industry can relate to the value of what they have in place, and it’s an area where the industry and employers need to work together.”
