Industry at a crossroads says Group Watch 2015

The group risk industry is at a crossroads despite figures showing the number of people covered increasing by 200,000 in 2014 says Swiss Re.

Premiums grew by 7.9 per cent across the board, the Swiss Re Group Risk Watch 2015 report, with an 8.9 per cent increase in in-force death benefit premiums, a 6 per cent increase in long-term disability income premiums and a 7.8 per cent increase in critical illness premiums.

Excepted group life premiums grew 27.9 per cent and benefits grew by 29.4 per cent, reflecting the response to changes to the lifetime allowance.

But Swiss Re UK & Ireland CEO Russell Higginbotham says the industry has failed to make a significant impact in raising awareness of the benefits of group risk products and may have to consider new ideas.

The number of people insured for long-term disability income protection through their employers increased by 1.9 per cent for 2014. In-force premiums were up 6 per cent to nearly £634m but there was a decrease in the number of in-force schemes of 0.4 per cent to 17,119.

Critical illness covers again experienced strong growth. In 2014, almost 475,000 people were covered, an increase of more than 90,000. In-force premiums increased by 7.8 per cent and sums assured by 15.2 per cent. The number of in-force schemes increased by 7.0 per cent to 2,840.

The report says that the industry needs to reflect on whether well-intentioned attempts to raise awareness of group risk have failed, and whether a new Government could push for simpler and more inclusive and affordable products as well as some form of auto-enrolment. It concludes ‘closer and better working with government and officials will be essential if we can decide what we would like our role to look like and be an important delivery model’.

Higginbotham says: “These are good figures for the group risk market – but they hide the fact that this industry is at a crossroads. The welfare state cannot continue to fund at current levels and the next Government will have to make cuts to the welfare budget. Insurers need to be ready to step up and adapt to that new reality. If we don’t, we may find existing models under threat in the same way that reforms have reconfigured pension provision.”

Report author Ron Wheatcroft says: “Auto-enrolment could be the way to increase coverage if we are unable to deliver growth to begin to fill the gap which will be left by declining state provision. Employees tell us that they would value greater workplace access to products and services but, somehow, this hasn’t translated to more coverage.”