UK group risk market premiums reached a record high in 2022, exceeding £3 billion for the first time, according to Swiss Re.
Swiss Re’s Group Watch report revealed an 8% year-on-year increase to £3.1bn in in-force market premiums. The number of in-force group risk policies rose by 3.6% to 87,376, covering 14,421,387 individuals, a 2.2% increase from the previous year.
Death benefits, long-term disability income (LTDI), and critical illness (CI) cover all saw growth, with in-force death benefit policies increasing by 2.7% and LTDI policies rising by 4.2%.
In-force benefits and premiums for LTDI and CI policies also increased. Of all in-force group risk policies, 71.2% provide death benefits, 22.3% provide LTDI, and 6.5% provide CI cover.
Swiss Re head group risk UKI Keith Williams said: “In a year of prolonged political and economic uncertainty, when high inflation plagued consumers and businesses alike, it’s great to see that interest in ‘added value’ benefits remained high across the board.
“The results for LTDI were particularly encouraging, equating to an additional 150,197 individuals insured at a time when the Government is looking to help more workers stay in – and return to – the workplace. What’s more, the fact that over 90% of in-force LTDI policies cover fewer than 250 employees demonstrates that the market does not just serve larger employers.”
Swiss Re technical manager Ron Wheatcroft believes that the recent proposal to change OpRA rules so that employees who salary sacrifice to increase their employer’s LTDI benefit will be taxed on both the contribution and the benefit may have an influence on future take-up.
He said: “It doesn’t seem fair that people should have both contributions and benefits taxed when using salary sacrifice, and this could lead to a decline in future take-up of cover through workplace arrangements.
“With cost-of-living concerns only emphasising the importance and value of group risk benefits, a clear theme in this year’s report is the need for stronger recognition of what the market does and its impact on society.
“Our industry’s efforts, coupled with the Government’s support in ensuring these products and services are as accessible and value-add as possible, should therefore be considered a key priority for the coming year.”
According to Wheatcroft, future adjustments to the Lifetime Allowance could result in a shift in the business mix.
He adds: “We welcomed the announcement that the Lifetime Allowance is to be abolished completely and believe that, over time, this will likely lead to some restructuring of the market. This is because the need to set up separate arrangements outside pensions legislation will no longer apply.
“The onus will be on employers and their advisers to consider how they wish to respond to this change, but indications are that those running Excepted Group Life Policies and Registered Group Life Policies in parallel may reduce these into a single arrangement.
“We do expect some employers to continue to use Excepted Group Life Policies and, against this backdrop, we strongly encourage the industry to continue pressing for an exemption from the Relevant Property Trust regime for all pure protection policies.”
Grid spokesperson Katharine Moxham added: “We’re fast approaching the point where the number of employees provided with group risk benefits via their employer equates to half of the payrolled population, which is incredibly positive news: particularly so in a year when the cost of living has impacted employees and employers alike.
“It is testament to the value employers of all sizes place on protecting families from the financial devastation that death, long-term sickness-absence from work, and being diagnosed with a serious medical condition can bring.
“As government continues its focus on encouraging more people back into the workplace and reducing the costs associated with having a significant proportion of the workforce economically inactive, it’s particularly encouraging to see the growth in group income protection, since this product is ideally placed to help employers to achieve exactly that.
“Group risk products (employer-sponsored life assurance, income protection and critical illness benefits) provide much more than financial support to people at the worst of times – they also facilitate access to practical help and support which often proves vital.”