Group risk – withstanding the test of legislation

At the end of July, the Insurance Industry Working Group (IIWG) published its report into the medium and long-term challenges facing the insurance industry.

The report provides some welcome optimism for the Group Risk market about the role of insurance in providing services and reducing the pressures on public expenditure. The legislative environment seems to constantly provide hurdles and opportunities for the future demand and relevance of group risk. The history of our market has shown that group risk products are adept at standing up to the test and continually evolving to meet customer needs.

Past challenges
It was widely considered that the Age Discrimination law would force employers to withdraw group risk cover from their benefits package as the resulting price increases could not and would not be met. There were some cancellations in cover, but the majority of employers continued to recognise the benefit of covering staff as well as being compliant with the law. Further legislation in the form of Welfare Reform provided an opportunity for both insurers and intermediaries to raise the profile of income protection as the Government attempts to take a firmer stance on assessing individuals for state benefits.

Present challenges
The current worldwide recession is affecting all business and the group risk market is no exception. Although the market is stagnating it appears to be more robust than expected. All companies are currently paying particular attention to their employee benefits package and are reviewing their package on the criteria of retain, revise or remove. Our experience shows that some companies are cancelling their cover, while others are continuing to provide risk benefits but are revising their benefit structures. Benefit designs may further be revised in light of the recent ruling on holiday pay (Stringer v HMRC) with staff having the right to accrue annual leave whilst off long term sick. However, we are still waiting guidance from the Department for Business Innovation and Skills (BIS) on how this new ruling is to be applied as it directly contradicts existing UK Working Time Regulations. The withdrawal of Aegon from the market this year set further hares running regarding the future of other providers. Providers such as Friends remain wholly committed towards the group risk market.

Future challenges
The challenges for the Group Risk market show no signs of abating with the industry needing to work closer together to find solutions. The Government announced in July that it would bring forward its review of the default retirement age to 2010. If it is withdrawn completely, at best this will lead to an increase in the cost of employee benefits such as income protection. At worse, some benefits could become uninsurable. Providers and GRiD (Group Risk Development) will need to work hard to make the government understand the implications of removing the default retirement age. The Equality Bill and Retail Distribution Review (RDR) may also provide further challenges to the Group Risk market over the coming months and years.

Whatever it faces, the Group Risk market has been resolute in adapting to the challenges that have been thrown at it. There are plenty more on the horizon and we must all be prepared to work together to protect this important employee benefit.

Group Risk Marketing ManagerFriends Provident”