Employers could face higher costs for providing life, critical illness and income protection insurance as benefits for staff, according to new research from Aon Consulting.
Its annual survey of group risk insurers and reinsurers found that although the cost of providing group risk benefits was cheaper in 2009 than 2008, underwriters do not expect cost reductions in the year ahead.
Half of the respondents believe they will have to increase the cost of income protection insurance. Although last year half of insurers predicted the premiums for lump sum life assurance would decrease, 50% now believe rates will remain steady, while 38% expect rates to increase.
The cost of critical illness cover is expected to increase according to 29% of respondents, while 29% also expect to see an increase in the cost of death-in-service pensions.
Paul White, head of risk benefits consulting at Aon Consulting, said: “Employers and employees have had a relatively good ride recently with the cost of some of the most basic employee perks decreasing. However, this year we are seeing more consensus among insurers that costs are likely to increase.
“Insurance underwriters and brokers have already seen employers cutting back on these type of benefits, offering cheaper alternatives, or shifting the cost to employees. This trend is likely to continue, particularly if the much speculated ‘double-dip’ recession does come to fruition, and companies potentially look at benefit reduction as a cost-saving measure.
“Companies should make sure they take advantage of the cheaper costs while they persist. For the future, the picture might not be rosy; however, companies should not jump straight to cutting their benefits programme. Companies should be working with their advisors to build and evidence a culture of managing risks and taking action to control claim costs, from wellness strategies to active absence management programmes.”
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