Risk opportunities beyond the core

Advisers are always calling for greater innovation from providers. Edmund Tirbutt looks at how things are working beyond the mainstream 

Some group risk providers argue that innovation isn’t needed because their core products are very much fit for purpose. Others, however, clearly disagree and have been extending the choice available to intermediaries through the launch of new formats. 

This March Legal & General made its ill health early retirement product for defined benefit pension schemes available to the private sector, having already offered it to public sector organisations for four years – where it covers more than 100,000 people. 

Aimed at schemes with over 100 active members, it provides an immediate cash lump sum to cover ill health early retirement, which can typically cost up to 10 times an employee’s annual salary. As an employer with 200 employees can expect to have one such claim every four years, there is considered to be a ready-made niche.  

Legal & General head of product and proposition James Walker says: “Defined benefit scheme trustees are on a journey to limit liabilities, and our book for this product in the public sector is actually bigger than our group critical illness cover book.”

This launch is too recent for objective feedback to be available, but Friends Life’s Group Cancer Cover (see box) has started to be digested by the market since being launched this January.        

Canada Life marketing director Paul Avis is quick to volunteer that his company will not be following suit. He points out that 73 per cent of Canada Life’s group critical claims are for cancer and argues that people are always going to get better value by having all his scheme’s 38 conditions covered.

He says: “The additional 20 per cent of premium for the 37 extra conditions makes perfect sense because you still have the same basic product expense if you only cover cancer.”

i2 Healthcare director Simon Derby is far more quite positive. Quotes done for his clients suggest Group Cancer Cover is good value for white collar workers. In one case of a scheme with several hundred employees the premium was under £60 per employee per year.

He says: “This is a product that has come at the right time as most of us know someone affected by cancer, so it should therefore appeal to employers and employees alike. I think it is more likely to become a standard industry-wide product than Unum’s Sick Pay Insurance, as it has broader appeal and is cheaper.”

Although launched whole-of-market in June 2013, the jury still remains out on Unum’s Sick Pay Insurance – which pays a regular monthly income if employees are off sick for up to 12 months. The fact that no other providers have yet followed suit suggests competitors remain unconvinced.  

A Unum spokesperson says: “The product’s performance is tracking as we expected it to, we continue to demonstrate its value to brokers, and our pipeline is good. So the signs are promising for this to become a mainstream product in time.”

Kerr Henderson director John Kerr does report an increase in interest in Sick Pay Insurance recently, particularly from the technology and legal sectors, where a lot of large mullti-nationals are providing competition.

He says: “A couple of clients have started to say that sick pay schemes are their biggest bugbear because some of their competitors are offering more generous terms. So they need to improve their terms to retain staff but they prefer to insure their liability.”

Kerr Henderson is starting to look quite closely at the idea of using Sick Pay Insurance

for its own 84 staff.  It currently has a 13 week deferred period on its group income protection scheme and is looking at increasing this to 52 weeks and putting in Sick Pay Insurance to cover

weeks 4 to 52. The initial indications are that such a move would be cost neutral.

On the other hand, Portus Consulting, which has been using Sick Pay Insurance for the past year to cover the 26 week deferred period on its group income protection scheme for its 40 staff, is anxious about what it may be charged at renewal.

Portus Consulting director David Dolding says: “We’ve had a couple of claims on it, so we’ve had good value, but the renewal premium could prove crucial. I feel the prices we are quoting our clients at the moment are quite high and we are experiencing very little demand as a result. The conversation we’ve had with Unum is that its price it too high to start with and it puts people off. But in theory it’s a very good contract and one that we still feel a lot of our clients should consider.”

Group risk intermediaries looking to get involved with these products should have little difficulty in understanding them because they are all essentially just variations on traditional group risk formats. Nevertheless, the same argument could be used for keyperson and other business protection cover, where intermediaries have been slow to capitalise on obvious opportunities.  

According to Legal & General’s 2015 State of the Nation’s SMEs report, released this March, 40 per cent of small businesses said they would cease trading within a year of losing a key employee or owner, yet 60 per cent have no key person cover. 50 per cent gave their reason for not having protection as being the fact that they had never considered it, yet 90 per cent said they would like to talk to a financial adviser about business protection.

Master Adviser partner Roy McLoughlin says: “Business protection is totally compatible with employee benefits and I always find it remarkable that few advisers sell both because the principles are exactly the same even if the tax considerations are different. Insurers provide exceptional technical support but the majority of intermediaries don’t engage. Whether this is due to fear or ignorance, they need to wake up because the potential market is huge and it’s going to get bigger and bigger.

“Auto-enrolment provides a way in to talk to employers about both business protection and group risk. Small business owners are actually more likely to go for key person than group risk schemes because they can relate to the task of survival more easily than to that of engaging employees through benefits packages. There is a general assumption that they are looked after by banks and accountants but it’s definitely not the case.”

Group risk intermediaries who deal with larger businesses can also be taking advantage of opportunities to sell personal accident and business travel cover, which tend to be packaged together. Even if they don’t have a general insurance arm they can still develop affiliations with other firms.

Zurich Corporate Risk propositions manager Nick Homer says: “Regulation drives market behaviour, so the industry as a whole tends to operate in a “product up” silo approach and therefore advisers miss opportunities. Customers’ HR departments will often approach advisers on the group risk or healthcare side about general insurance products but they struggle to help.”

Kerr Henderson automatically provides quotes for personal accident and business travel when talking about pension auto-enrolment and group risk.

Kerr says: “Generally they prefer the business travel element to the personal accident one because with some market leaders the directors also get free personal cover for themselves and their families for holidays with no pre-existing condition exclusions. It’s hard to get group business travel any cheaper without personal accident cover so they tend to go for both but the occasional client has insisted on stand-alone personal accident.”

Group risk intermediaries that also have their own general insurance and financial planning arms are clearly at an advantage when it comes to selling business protection and personal accident/business travel, but there is still a major internal communications exercise to be undertaken.

Jelf Financial Planning head of protection Adrian Bates says: “The challenge is to get the different sides of the business talking to each other as everyone has the day job. So in recent weeks I’ve been making our general insurance and employee benefits arms aware of business protection and there has been a distinct increase in the amount of referrals happening.”


This January Friends life became the first UK provider to offer employer-funded cancer-only cover. It is available to any company looking to insure 100 or more employees, and will pay a fixed amount of £25,000 to those diagnosed by a cancer covered by the plan.

Whilst it is too early for the insurer to talk in terms of concrete sales, it reports strong initial interest.

Friends Life head of group protection proposition Anna Spender says: “The reaction from the market to Group Cancer Cover has been really encouraging, which shows that we’ve developed a product that can help businesses and their employees. We’ve been getting enquiries from a range of intermediaries representing companies from right across the market. The product is enabling intermediaries to go back and have a new discussion with their clients.

“We began developing it after research by Capita Employee Benefits looked at what products employees valued against what employers actually provided. According to recent research from Macmillan Cancer Support, there will be a record high of 2.5 million people living with cancer in the UK this year.”