When providers are reluctant to comment and intermediaries have wildly contrasting views, it suggests that all is not hunky-dory with the group critical illness market.
Swiss Re’s Group Watch data suggests healthy progress, (see box), but the picture is distorted by the growth being from a tiny base.
Looking at the group risk sector it is notable that two major providers, MetLife and Zurich, fail to offer group CI at all. Meanwhile, Generali is arguably a non-participant, as it doesn’t market these policies and only uses them for captive clients.
Unum and Legal & General declined Corporate Adviser’s request to comment on market trends, and it would be inappropriate to contact AIG Life during the acquisition of its book. So, provider feedback comes only from Canada Life and Aviva.
The fact that many critical illness schemes (around 70 per cent in-force market-wide according to Aviva) are written via flex and voluntary arrangements, which smaller intermediaries tend to have less involvement with, also helps explain the differing opinions as to the health, or otherwise, of this market.
Barriers
Most intermediaries continue to single out the exclusion of pre-existing conditions and, for company paid cover, the creation of P11D liabilities as major dampeners on demand.
The product’s complexity and ability only to pay out for stated conditions, regardless of whether they impact the ability to work, also come in for criticism.
Steve Ellis head of employment benefit consulting at Prosperis says: “It can be very bad for morale if one employee gets a payout and another doesn’t. So, I see group critical illness as the best advert for group income protection, which excludes only routine pregnancy.
“With income protection most employees are covered for pre-existing conditions via the free-cover limit but the critical illness free-cover limit only spares them from medical underwriting at the outset, not from pre-existing condition exclusions at the claims stage.”
Product innovation
Lack of provider focus is also contributing to slow growth in the market, with the product innovation volunteered being far from earth shattering.
For example, Canada Life reports that enhancements such as second and subsequent cancer and child-specific illness have become more popular during the past couple of years, with some insurers including them as standard.
Gallagher highlights that Legal & General has recently updated its definitions to Alzheimer’s, cancer and heart attack to reflect the Association of British Insurers’ (ABI) 2022 revised minimum standards guidelines, and, perhaps more importantly, refers to recent innovation in provider provision that has reduced underwriting requirements and made pre-existing and linked-claims condition clauses significantly less restrictive.
LifeSearch is the only other intermediary, out of half a dozen consulted, to observe any improvement in the quality of plans.
Alan Richardson, head of business protection & group at LifeSearch, says: “In the last couple of years we’ve seen more conditions being added to the advanced cover ranges, and there is very little difference in cost between these and the core cover ranges. So, it is sensible to review old policies and move to advanced cover as standard.”
The common intermediary response is that, apart from insurers conspicuously bolstering their add-on features, there has been virtually no product change.
Nadeem Farid, head of health & wellbeing benefits at Drewberry, says: “Most of these add-ons are also available on group income protection, so it can just result in an embarrassment of riches. Insurers would prefer to focus on life and income protection where there is more demand.”
Insurers also need to make more effort to provide promotional material, especially case studies. Kevin O’Neill, consulting lead, health & protection at Barnett Waddingham, says: “Insurers could give us more stories to use, like some have done with group income protection. It’s about having a suite of information we can easily access with all the bits and pieces to bring the product to life.”
Pricing issues
These barriers have been added to by more recent premium hikes, which possibly explains the reluctance of some providers to comment on this market at present.
Aviva acknowledges an upward trend for cancer claims but insists this isn’t currently having an impact on pricing, whilst Canada Life reports that the average market rate has increased by around 2.5 per cent per annum over the last five years.
But intermediaries give a different view on price pressures in this market. Richardson says: “Prices are going up a bit quicker than with group income protection. Historically £50,000 of group critical illness cover would have been competitive or on an even keel with group income protection. Now it tends to cost more, so price becomes an extra consideration.
“The number of employers saying ‘yes’ to a critical illness solution during the last year has reduced, and the product has lost its way a little bit. It has taken a bit of a battering because private medical insurance (PMI) is becoming a must-have.”
Clare Dare, head of health, risk & technology at PIB Employee Benefits, refers to anything between 10 per cent and 30 per cent group critical illness premium increases at bi-annual renewal, which she attributes to claims increases across the board. However, she takes a contrary view to Richardson on the impact of PMI.
“We can negotiate pricing a little bit at renewal and maybe shave a few per cent off, but the challenge is to keep rates sustainable. Claims increases could be the belated impact of people not being diagnosed quickly enough during Covid, but they could equally also reflect an increased focus on prevention by employers catching things earlier.
“The premium increases are not leading to cancellations, and we’ve even seen quite a few employers looking to implement new schemes, some because of the increased cost of PMI. In extreme cases PMI premiums have doubled at renewal.”
Other reasons to be cheerful include Aviva reporting that over the last year it saw adviser requests to provide terms for CI increasing by 10 per cent, and that both Aviva and Canada Life are particularly positive about opportunities in the flexible benefits space.
PIB Employee Benefits refers to greater employee appetite via voluntary flex, with demand increasing by 5 per cent to 10 per cent over the past two years on a couple of bigger schemes, and Gallagher reports that corporate provision of critical illness cover has “shot up”, with the product being far more central to the employee benefits conversation than ever before.
But such patchy fragments of good news have been commonplace in this field for years without take-off point ever even being approached. The percentage increases boasted by group critical illness may look impressive, but the numbers involved remain only a tiny fraction of the group risk market as a whole.
