Group risk market sees record premiums despite Cost-of-Living crisis: Swiss Re

The UK group risk market has reported record premiums in 2022 despite the cost-of-living crisis and uncertain economic background, the latest Swiss Re Group Watch report shows.

Related topics:  group protection,  Protection
Rozi Jones
13th April 2023
Group Protection
"In a year of prolonged political and economic uncertainty, when high inflation plagued consumers and businesses alike, it’s great to see that interest in ‘added value’ benefits remained high across the board."

The data shows that in-force market premiums exceeded £3 billion for the first-time last year, increasing 8% to £3.1 billion year-on-year.

Moreover, the number of total in-force group risk policies rose by 3.6% to 87,376 (up from 84,369 in 2021), and the number of people insured hit 14,421,387 by the end of 2022 – 2.2% higher than the previous year.

The figures also show that the number of in-force death benefit policies increased by 2.7%, with lump-sum death benefits and premiums coming in 8.8% and 9.1% higher respectively.

There was a 5.5% increase in the membership of excepted group life policies and a 0.7% increase in the membership of registered group life policies.

Long-term disability income (LTDI): The number of in-force LTDI policies increased by 4.2% and the number of people insured rose to 3,053,808 – up 5.2% compared to 2021. The in-force benefits and premiums amounts for LTDI policies rose by 3.9% and 8.6% respectively.

The number of in-force critical illness (CI) cover policies increased by 11.6%, with in-force benefits and premiums amounts rising 9.7% and 11.6% respectively.

Of all in-force group risk policies, 71.2% provide death benefits, 22.3% provided LTDI, and 6.5% provided CI cover.

Keith Williams, head of group risk UKI at Swiss Re and one of the authors of Group Watch 2023, has said:

“In a year of prolonged political and economic uncertainty, when high inflation plagued consumers and businesses alike, it’s great to see that interest in ‘added value’ benefits remained high across the board.

“The results for LTDI were particularly encouraging, equating to an additional 150,197 individuals insured at a time when the Government is looking to help more workers stay in – and return to – the workplace. What’s more, the fact that over 90% of in-force LTDI policies cover fewer than 250 employees demonstrates that the market does not just serve larger employers.”

Ron Wheatcroft, co-author of Group Watch 2023 and technical manager for L&H UKI at Swiss Re, said:

“It doesn’t seem fair that people should have both contributions and benefits taxed when using salary sacrifice, and this could lead to a decline in future take-up of cover through workplace arrangements.

“With cost-of-living concerns only emphasising the importance and value of group risk benefits, a clear theme in this year’s report is the need for stronger recognition of what the market does and its impact on society.

“Our industry’s efforts, coupled with the Government’s support in ensuring these products and services are as accessible and value-add as possible, should therefore be considered a key priority for the coming year.”

Wheatcroft also felt that changes to the lifetime allowance could trigger a change in business mix moving forward.

“We welcomed the announcement that the lifetime allowance is to be abolished completely and believe that, over time, this will likely lead to some restructuring of the market. This is because the need to set up separate arrangements outside pensions legislation will no longer apply. The onus will be on employers and their advisers to consider how they wish to respond to this change, but indications are that those running excepted group life policies and registered group life policies in parallel may reduce these into a single arrangement.

“We do expect some employers to continue to use excepted group life policies and, against this backdrop, we strongly encourage the industry to continue pressing for an exemption from the Relevant Property Trust regime for all pure protection policies.”

Katharine Moxham, spokesperson for GRiD, added:

“We’re fast approaching the point where the number of employees provided with group risk benefits via their employer equates to half of the pay-rolled population, which is incredibly positive news: particularly so in a year when the cost of living has impacted employees and employers alike. It is testament to the value employers of all sizes place on protecting families from the financial devastation that death, long-term sickness-absence from work, and being diagnosed with a serious medical condition can bring.

“As government continues its focus on encouraging more people back into the workplace and reducing the costs associated with having a significant proportion of the workforce economically inactive, it’s particularly encouraging to see the growth in group income protection, since this product is ideally placed to help employers to achieve exactly that.

"Group risk products (employer-sponsored life assurance, income protection and critical illness benefits) provide much more than financial support to people at the worst of times – they also facilitate access to practical help and support which often proves vital.”

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