Group risk market bounces back with 10 per cent increase

The UK group risk market showed very strong growth in 2012 with a 9.7 per cent increase in in-force premiums in, driven by some hardening of rates as well as increases in number of lives and schemes, according to Swiss Re’s Group Watch 2013 report.

The effects of the the introduction of auto-enrolment are still to have an impact on the market. The total cover provided by employer sponsored death benefits arrangements topped £1 billion in 2012 a milestone for the industry.

The report shows very strong premium growth in in-force premiums for death benefits, long-term disability income and critical illness protection in the UK market. Group death benefit premiums increased by 9.8 per cent, with excepted group life premiums increasing by 14.8 per cent. Long-term disability and critical illness premiums also showed very strong growth of 8.7 per cent each for the year.

The report finds that some growth was driven by premium increases, with 80 per cent of industry respondents to Group Watch’s qualitative survey reporting hardening rates in the group death benefits sector. But improvements in the market were also supported by a positive increase in the number of lives and number of schemes in the market.

The figure of £1 billion in premiums for the group death benefits sector is a milestone for the industry, says Ron Wheatcroft, Swiss Re expert on the UK group life market and author of Group Watch 2013.

There were few negatives in this year’s Group Watch 2013 report. The number of lives covered under widows’ and dependants’ death in service pensions fell by 3.1 per cent with a 2.5 per cent decrease in the number of schemes. This is largely attributable to the low interest rate environment which has resulted in the provision of lump sum cover becoming more attractive.

The report concludes that further legislative changes will place a greater emphasis on high quality advice to finding the most appropriate benefit packages for employers and their workforces. For example, further reductions in annual allowance and lifetime allowance from April 2014 may increase demand for non-pension linked death benefits, accelerating a trend which is already being seen in the growth of excepted group life cover.

Wheatcroft says: “These figures surpass anything we have seen since we started collecting data in 2006. One of the key trends is a switch away from widows and orphans benefits with employers finding it easier and cleaner to provide a lump sum.

“The income protection numbers are positive. We are seeing a shift away from benefits through to retirement towards a five year period, which reflects changing working patterns. There is also some cost increase in there reflecting the gradually ageing workforce