12.5m people covered by group risk schemes in 2017

Ron Wheatcroft Group Risk

Nearly 12.5 million individuals were covered by group risk schemes at the end of 2017, according to research by Swiss Re.

Its Group watch 2018 report, which is based on data collected from 16 product providers in the group risk market in the UK, 18 employee benefits consultancies and one independent consultant, also found that 378,062 more people became members of group risk schemes by the end of 2017 compared to 2016, representing an increase of 3.1%.

The research also found:

  • Death-in-service policy membership increased by 3% in 2017, with employer-sponsored group risk policies having around 9.5 million members.
  • Long-term disability income policy membership increased by 5% in 2017 to reach 2.4 million members in employer-sponsored group risk policies.
  • Members of employer-sponsored critical illness policies decreased by 2.5% in 2017, from 586,275 members in 2016 to 571,848 members in 2017.
  • Long-term disability income total market premiums increased by 6.3% to £724 million at the end of 2017.
  • Death-in-service total market premiums rose by 4.3% by the end of 2017 to reach approximately £1.3 billion.
  • Critical illness total market premiums are just over £101 million at the end of 2017, increasing by 7.4%.
  • In-force excepted group life policies increased by 14.3% in 2017, with the number of policies rising by just under 150% since 2013.
  • Excepted group life policy members increased by 21.4% in 2017 to 782,674 people.

Ron Wheatcroft (pictured), technical manager at Swiss Re, said: “Overall, the results are encouraging, in particular the positive long-term disability income where, after many years of slow decline in policy numbers, the data [shows] an upturn, both in policies in force and people covered. This increase was evenly spread across a range of policy sizes.

“Despite ever-increasing cost pressures on employers, more than 90% of all arrangements provide cover for a period of at least five years, providing vital financial support for [employees] and for their families.

“More people being covered under death-in-service policies is very welcome. There are issues for trustees of [excepted group life policies], however, with the discretionary trusts used to facilitate payment potentially subject to periodic, entry and exit charges. The amount of revenue generated is tiny, no more than £1 million per annum. The costs of the legal advice needed at outset and administering the tax outweigh this by a factor of four or five. As the market grows, the disparity between costs and revenue raised increases.

“We are urging the government, in its consultation on the taxation of trusts, to remove this burden from employers who are simply trying to do the right thing for their workforce by arranging simple life cover to protect their families and dependents. This could best be achieved by an exemption where the sole asset of a discretionary trust is an [excepted group life policy].

Katharine Moxham, spokesperson for Group Risk Development (Grid), said: “It’s been another positive year for the group risk industry, showing growth of in force benefits across all three group risk products and nearly 380,000 more people protected against financial loss via group risk insurance during 2017.

“Group risk benefits throw a financial lifeline to families when they need it most and nobody should be without the means to protect their household’s financial position against unexpected death, disability, injury or illness. Employers play such an important role in facilitating affordable financial protection cover through the workplace but now, increasingly, government is looking to employers to help meet its ambitions for a healthy and inclusive workforce too. Group risk benefits can help deliver this through the inherent support services that group risk providers make available to employers, HR, line managers and employees for use on a daily basis.

“Indeed, enlightened employers of all sizes are seeing the value of group risk benefits, not only for financial resilience but also in helping to deliver on engagement, productivity, recruitment and retention.”

Tim Stoves, managing director at Canada Life Group, added: “We are delighted to be confirmed as the largest provider of group risk benefits in the UK once again. Our market-leading premium share is underpinned by the fact that we cover more employer schemes and employees than any other insurer. Our value and service offering has triumphed thanks to a clear understanding by advisers and our employer customers of the importance of each. Provider choices have to be carefully considered in this emotive and sometimes complex area and we welcome the recognition of the unique,  extensive level of support that we give to employees in their times of most need.

“[Canada Life Automated Self-Service] continues to help advisers grow their [small and medium enterprise] portfolios and is clearly the platform of choice, currently servicing over 12% of all group risk schemes in the UK. The breadth and depth of our group income protection proposition continues to be valued, and our unparalleled level of support available has enabled us to retain business despite differences in pricing philosophy. Our positive results in group critical illness owe credit to our recognised and  increasing expertise in flexible and online benefits, coupled with our market-leading service and technical excellence. Across all of our product areas we have seen a strong set of results and the credit for this goes to our Bristol team that continues to look for new ways to delight our advisers, customers and their employees.”