Critical illness rising but pessimism over GIP – Group Watch 2009

Group income protection business volumes failed to keep up with inflation in 2008 but critical illness business soared 22 per cent, according to Group Watch 2009 from Swiss Re.

GIP in-force premiums rose to £648m, an increase of just 1.2 per cent compared to 2007, and the report says the outlook for the sector is ‘pessimistic’.

While coming from a much lower starting point, in-force premiums for group critical illness cover stood at £45.4 million, up 22 per cent on 2007’s figures. Swiss Re says growth in 2009 and beyond is expected to depend heavily on new business written via flexible benefits packages.

In-force market premiums for group death benefits totalled £945.2 million in 2008, an increase of 3.8 per cent on 2007.

Report author Ron Wheatcroft says uncertainty over regulation continues to be a challenge, with one of the biggest factors influencing the market in 2007 and 2008, being the impact of legislation. The uncertainty around the practical implementation of the regulations governing age discrimination in the workplace was particularly problematic. The report say that while some legal certainty is beginning to emerge, there is still no clarity over what is acceptable under these regulations despite ongoing industry discussions with the Government to find workable solutions.

In the report, Swiss Re urges the group protection industry to push for clarity so that employers can reach the best outcome for their business and employees.

As well as presenting quantitative data, this year’s Group Watch analysed the opinions from a qualitative survey conducted among product providers and intermediaries in the group risk market.

It finds that against a difficult economic climate, the overwhelming issue facing employers was the cost of providing benefit packages to employees, and suggested some concern that sales via flexible benefit arrangements will start to slow as employers focus more on core expenses.

Swiss Re says another key theme coming out of the report is the need to promote the value of group risk better to employees, scheme members, the media, government and other policy influencers but adds it is encouraged that respondents are upbeat about the progress the group risk market is making in working together to spread its key messages.

Group Watch 2009 author Ron Wheatcroft says: “Market sentiment suggests that the group risk market must get its act together during 2009 if the negative expectations for market performance are not to become a self-fulfilling prophesy. As more employers offer flex packages the protection industry must engage better with employees so that they fully understand the value of the protection available through the workplace.”