Nearly 12.9 million people were covered by group risk schemes in 2018

Ron Wheatcroft

Nearly 12.9 million individuals were covered by group risk schemes at the end of 2018, according to research by insurance provider Swiss Re.

Its Group watch 2019 report, which is based on data collected from 13 product providers in the group risk market in the UK and 20 employee benefits consultants, also found that 408,519 individuals became members of employer-sponsored group risk schemes in 2018, representing a year-on-year increase of 3.3%.

Ron Wheatcroft (pictured), technical manager at Swiss Re, said: “Overall, the results are solid. Respondents to the market survey among providers and intermediaries referred to the very uncertain business environment in which many of their clients were operating. This has seen a number of decisions deferred and a reluctance to take on new commitments until the business environment becomes clearer.”

Between 2017 and 2018, members of employer-sponsored critical illness policies increased by 4.8%, rising from 571,848 in 2017 to 599,023 in 2018. The total market premium for these policies at the end of 2018 was just under £113 billion, showing an increase of 10.8%.

Lump sum death-in-service policy membership increased by 4.7% in 2018, rising to approximately 9.6 million members, compared to 9.1 million in 2017. The total market premium for this benefit has also risen, increasing by 8.7% in 2018 to £1.3 billion.

The membership of employer-sponsored long-term disability income policies increased by 2.2% between 2017 and 2018, moving from around 2.4 million members to 2.5 million. Total market premiums are reported as £761 million at the end of 2018; this is an increase of 5.1%.

Membership of dependants’ death-in-service policies has decreased by 29.7%, from 354,578 in 2017 to 249,058 in 2018. This is reflected in the total market premium, which has fallen by 17.1% to stand at £139 million.

Excepted group life policy membership increased by 27.2% between 2017 and 2018, to cover 995,203 people; this compares to 391,438 individuals who were members of this type of policy in 2014. The number of in-force excepted group life policies has grown by 21.8%, from 7,130 to 8,686, while dependants’ death-in-service pension policies decreased by 10.6% in 2018.

Wheatcroft added: “Employer-sponsored death-in-service benefits have a vital role to play in protecting families against the financial consequences of an early death. Two trends are apparent this year. Firstly, the decline in dependants’ death-in service pensions. While this business line has been in decline for many years, 2018 saw that decline accelerate as larger policies closed and were replaced by lump sum death benefits.

“[Last year] also saw further growth in excepted group life policies, as the market seeks alternatives to dependants’ death-in-service pension arrangements and to pension-related death benefits. This reinforces the need to continue working with government to obtain an exemption for such arrangements from periodic, entry and exit charges on the discretionary trusts holding such policies.

“We estimate the annual cost of compliance for excepted group life policies alone to be £2.1 million with further costs of a similar magnitude for legal advice. Yet, the revenue generated is tiny and no more than £1 million per annum. As the market continues to grow, the disparity between costs and revenue increases.

“In responding to HM Revenue and Custom’s consultation on the taxation of trusts earlier this year, we reiterated our recommendation for an exemption, suggesting this be granted for all discretionary trusts where the asset is one or more life policies which can only pay out on death or disability. This would remove a burden from employers using excepted group life policies who are simply trying to do the right thing for their workforce by arranging life cover to protect their families and dependants and where the potential tax charge is both random and arbitrary.”

Katharine Moxhan, spokesperson at Group Risk Development (Grid), said: “As supporting the health and wellbeing of staff, and, in particular, mental wellbeing, moves up the workplace agenda, employers are increasingly looking for help in how to do this; a lot of the answers can be found in group risk protection products. The inherent support services that come with them significantly extend the reach of the help employers can give to their people.

“It is disappointing, however, that employers say that uncertainty around Brexit is holding them back from implementing group risk protection products. [Employees] still need a means of protecting their household’s financial position against unexpected death, disability, injury or illness, regardless of politics.

“We would urge employers to look at what’s going on alongside Brexit negotiations, where increasingly, [the] government is looking to employers to help meet its ambitions for a healthy and inclusive workforce, and those employers that utilise the benefits within group risk are in a much better position to meet government’s expectations around good work, especially for mental health.”