"This means widening the health narrative to include the important role vocational rehabilitation plays in supporting workers and ensuring the tax system treats occupational health and vocational rehabilitation services consistently."
- Ron Wheatcroft, Technical Manager at Swiss Re
According to Swiss Re’s ‘Group Watch 2024’ report, the group risk market in the UK saw another record year in 2023. Overall, the level of insured individuals and benefits increased across all three product lines: Death in Service, Long-term Disability Income (LTDI) & Group Critical Illness (GCI). The number of in-force policies increased by 4,420 (rising from 87,376 to 91,796), while the number of people insured reached 15,314,655 - this is 6.2% higher than the year prior.
Considering the context, Swiss Re highlighted that domestic politics were relatively calm in 2023, after three Prime Ministers and four Chancellors of the Exchequer in 2022. Average Weekly Earnings (Whole Economy, Seasonally Adjusted Total Pay ex Arrears) peaked at 9.3% year-on-year in June, before slowing into year-end across public and private sectors amid slowing economic activity. Businesses encountered a difficult year, characterised by elevated interest rates, and increased costs. Quarterly bankruptcy rates were exacerbated by the presence of ‘zombie companies’, which had relied on the Government’s support during the Pandemic.
Despite these challenges, Employee Benefits Consultants (EBCs) have said “We had more clients asking for benchmarking to see if they could make changes to their schemes” and “Not as much [of a decline] as the doomsday merchants predicted!”
The number of individuals covered under lump sum death benefit schemes increased by 579,083 – this takes the number of people insured to 11,083,680. Likewise, insured benefits under lump sum death benefit schemes increased by 12.9%, totalling insured benefits at £1,781,573,066,000.
The decline in dependants’ Death in Service pensions continued, with a 41.1% reduction in in-force customers - this figure sat at 239,592 customers in 2019.
The number of people covered under LTDI increased by 201,377 (6.6%). Insured benefits under LTDI schemes rose by 12.5%, taking total insured benefits to £124,887,714 per annum. Notably, more than 90% of all in-force LTDI policies cover fewer than two hundred and fifty customers – this is a typical benchmark for Small or Medium Enterprises (SMEs).
Meanwhile, the number of customers insured with GCI schemes increased by 164,817 – this takes the number of people insured to 901,387. Insured benefits under GCI schemes also climbed by 14.2%, totalling insured benefits to £64,283,622,000.
“In the face of increasing costs for death and disability benefits, it’s extremely encouraging to see the value employers put on the provision of risk benefits to attract, retain, and support their workforces,” said Ron Wheatcroft, joint-author of this report.
He said it was “particularly pleasing to see a further 201,377 members of LTDI policies in 2023, on the basis that workplace LTDI policies not only pay a proportion of pre-disability earnings but also bring additional benefits to help people to remain in or return to work as and when they are able.”
However, Ron believes more must be done to help employers; “This means widening the health narrative to include the important role vocational rehabilitation plays in supporting workers and ensuring the tax system treats occupational health and vocational rehabilitation services consistently.”
READ MORE: Vocational Rehabilitation tends to be the poor relation; it’s overlooked and forgotten
“This year we’ve seen calls from product providers and EBCs for the Government to reconsider the tax treatment of contributions made by customers to extend LTDI benefits provided by their employer,” he explained. For the second year in a row, the number of schemes offering this facility has reduced, with the double taxation of premiums and benefits acting as a barrier to what could otherwise be greater personal resilience.
Ron also highlighted that expected group life policy numbers are growing much faster than registered pension arrangements. “The trend towards using excepted group life policies (EGLPs) will continue, given the potential tax liability for benefits above the limit now known as the lump sum and death benefit allowance,” he concluded.
