The group risk market (employer-sponsored group life, long-term disability income insurance and critical illness insurance) remains a vitally important cog in both the UK economy and society.
On the face of it, the industry is healthy. Across many measures, the market grew over the last year, despite pandemic-tainted headwinds, as the data from our latest Group Watch report show.
But there are other challenges for the industry to contend with – not viral but policy-based.
It is important that legislators and other decision makers consider these issues in the light of a society grappling with a cost-of-living crisis and a protection gap. These issues are not just confined to consumers but, equally, affect businesses and their spending choices.
In the two years since the UK first went into lockdown, the group risk market generally coped well and provided excellent support for its customers.
Our annual Group Watch report collates comprehensive data, together with views from a large number of industry participants – and is a useful barometer for the health of the market.
The report shows that the number of people insured rose from 13,317,249 by the end of 2020 to 14,106,854 by the end of 2021 – a 5.9% rise that is a record increase, both in percentage terms and in the number of people insured. The number of in-force group risk policies increased by 4.1% from 81,055 in 2020 to 84,369 in 2021.
Overall, the data paints a picture of positive market performance with increased coverage across all three policy lines. There is a mood of confidence that the market has raised its game over the past two years – and also one of optimism that it is well-placed to show its value in future.
One notable theme from the report is the greater use of services by members, primarily driven by employee assistance programmes (EAP) and an enormous growth in services offering virtual GPs. It was encouraging to see many respondents referring to this, with employers keen to promote these benefits and taking more time to understand how they work.
Of course, this is just one aspect of the group risk proposition with insurers providing active support to help return people to work whenever possible, often working closely with vocational rehabilitation specialists and other experts.
However, the future remains very unclear, and this is where the optimism starts to wane.
While the UK appears to be better placed in managing the impact of the pandemic, its effect on our health systems, the private health sector, employers and employees is uncertain, and there is always the possibility of further variants.
Meanwhile, the economy is frail, with rising inflation and utility costs. More funding has been promised by the Government to meet the costs of the NHS and social care. The cost of this is falling on employers and workers alike with the 1.25% rise in National Insurance Contributions and subsequent Health and Social Care Levy.
As we emerge from the pandemic, the world of work has changed for many, with little likelihood of going back to the “old norm”. One positive consequence has been the greater application of technology both in employers generally to support more flexible working and, specifically, in the group risk sector. Well adopted, this can only help bring the complete package of benefits and services closer to the end member.
Time will tell whether the current products and benefits will remain as relevant in a world of work configured far less around a central site. Currently, costs, efficiencies, skills shortages and employee preferences continue to drive many businesses further away from the more traditional models. This might generate more demand to expand further or change the range of services offered within the group risk proposition.
To make product models more accessible as businesses struggle against economic headwinds, concerted action is required from the industry and Government.
For example, there is a need to establish a simple process for the tax treatment of member contributions and benefits within long-term disability income policies. Group Watch 2022 shows that membership of policies which allow the members to increase their cover has levelled off, this despite the increase in membership across all policies. Some employers are withdrawing completely the facility for members to top up the basic benefit as a simple proposition has become unnecessarily complex.
Freezing the Lifetime Allowance until 2026 adds complexity for group life cover held within pension arrangements and we persist in calling for an exemption from entry, periodic and exit tax charges for trusts holding as a sole asset all non-pension pure protection policies. This includes relevant life policies and excepted group life policies whose membership grew by more than 42% in 2020.
In bringing forward these policy measures, there is a fantastic opportunity to support and encourage the industry to make employers, workers and society in general more resilient.
Ron Wheatcroft, Technical Manager, L&H UKI, at Swiss Re