Life assurance has evolved considerably in the last few decades, so what does it look like today?
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- Group life assurance is the most commonly offered benefit to employees.
- The benefit often now includes value-added services such as bereavement counselling.
- Group life assurance products continue to be driven by price rather than innovation.
Historically, employers tended to offer life assurance as a bolt-on to their defined benefit (DB) workplace pension scheme. However, the demise of DB schemes has prompted them to reconsider this tradition in order to help cut costs.
Nevertheless, life assurance remains one of the most common benefits offered to UK employees. Employee Benefits’ Benefits research 2014, published in May, found that 77% of respondents offer it as a core benefit, compared with only 6% in flexible benefits polices and 2% on a voluntary basis.
According to Swiss Re’s Group watch report 2014, published in April, the group life assurance market covers more than 8.5 million lives across 48,000 employers, which is why the group life industry needs to innovate.
One of the latest innovations to have been launched into the market is Havensrock. The policy, which was launched in October by Punter Southall Health and Protection Consulting (PSHPC) and insured by Scottish Friendly, allows employees to add their partner to a group life assurance policy through a dependant’s benefit.
John Dean, managing director at PSHPC, says: “The benefit of life assurance is for employees’ families. It does not help [in the event of] the death of an employee or the employer other than [by providing] confidence that those left behind are looked after. However, what happens to the employee and the employer if the employee’s partner dies?”
Dean says that such tragic events may be supported by an organisation’s compassionate leave policy, but only for a limited time. Havensrock has been designed to alleviate any shortfall in support by providing cover for employees and their families for a longer period.
The payment from a dependent’s policy could be used to cover a range of costs, such as the cost of a funeral, or to supplement a termination payment from an employer if an employee feels that they cannot continue working following a family tragedy.
Employers need to communicate the benefits of group risk
Such product details often remain unknown to employees because their employers fail to fully communicate the benefits of group risk cover.
This is unsurprising in light of the Canada Life Group Insurance ORC Employer research, published in April, which found that 18% of professionals do not understand group life assurance, and that 32% are unsure of its cost or value to their organisation.
There are of course exceptions, such as employees who have group life cover worth up to four times their salary, who will be more likely to understand the value of the benefit. And there may be even greater awareness of the product in the future as some employers begin to offer their employees even higher multiples of between six and eight times their salary.
But freedom of choice is key, as some employees, particularly those aged 20 to 30, may prefer to flex down their multiples to around two times their salary and spend their flex allowance on other benefits that they consider more valuable, such as extra holiday.
Value-added benefits will help raise awareness of the market
The rise of group life packages featuring value-added services is a market innovation that is also likely to raise employees’ awareness of the group risk market.
Services include bereavement counselling, will writing and probate support. Such benefits are aimed to help support employees affected by the emotional impact of a tragedy.
Katharine Moxham, spokesperson for Group Risk Development, says: “Providers are looking to differentiate products, but they are also looking to add value to the product by offering employers things such as bereavement counselling for children, through [charity] Winston’s Wish or an employee assistance programme.”
But Chris Ford, managing director, corporate and individual protection at Jelf Employee Benefits, says that employers should be aware that not all insurers offer these benefits. “Some will have a combination, while others will have the odd one here and there”. He adds: “[Value-added services] give group life insurers a competitive edge and have also helped employers communicate life assurance in an easier manner.”
Group risk benefits remain a price-driven product
Another innovation is claims verification for claimants, which allows employers to provide faster claims processingby registering a claim and upload supporting material, such as a death certificate, to provide notice of an employee’s death. This is instead of employers having to wait for their insurer to receive the material in the post.
But despite all of these innovations, group risk benefits remain price-driven products because of employers’ demand for the cheapest deal.
David Williams, director of group protection at Friends Life, says: “The desire to speed up the processing of claims has been significant for insurers, but group life is a price-driven benefit and it will remain that way. While the added services add value, they do not bring down the price.”
So it seems that the need for insurers to communicate the benefits of group risk benefits to employers and then to help them relay these benefits to their employees is more pressing than product innovation, at least for now.