Headline figures in Group Watch 2017 suggesting positive growth disguise a lacklustre level of new-to-market business says Ellipse distributor partnerships director Chris Morgan
While the number of people insured has increased by 3.9 per cent, compared to 2.4 per cent in 2015, the premium growth of group life is lower than it was previously. This may be explained by an increasingly competitive market, but it could also suggest that while more people are being covered, they are typically being insured on lower benefits. The figures for registered schemes, typically the preferred arrangements for low/middle income employees, illustrates this as lump sum benefits have grown at a lower rate.
It is positive to see that the number of new policies has also increased by 2.7 per cent, suggesting growth from new SMEs setting up cover for the first time. However, given the popularity of excepted group life schemes it is likely that many of these new schemes are being established from existing insured registered schemes, not true new to market business. Unfortunately the report does not show the latter which would be a more accurate indicator of the employer growth rate. With this in mind, while the growth rate is still positive, it is much lower than it should be given that there are approximately 1.3m employers in the UK and only 50,000 group life policies.
The reduction in death in service pension (DISP) benefits and corresponding premiums continues from previous years, but less steeply than before. This may be because schemes which were obvious candidates to be switched to a replacement lump sum benefit, have already done so. That may leave smaller closed schemes where there is less value in switching to a replacement lump sum.
2015 was a very positive year for growth in group critical illness and 2016 has continued that trend with the number of new group critical illness schemes setup almost identical to the previous year. This suggests that the product is still popular among employers, especially those establishing flexible and voluntary schemes. However, the number of people covered by flex schemes has grown at a slower rate than last year, and while this fluctuation is relatively minor in real terms due to the size of the market, close attention should be paid to this as an indicator of the employee take-up. After all, with flexible and voluntary schemes, it’s the employee take-up that really matters. A greater focus on employee engagement and communication is crucial to help boost take-up.
The increase in the number of people covered by group income protection – 6.3 per cent – is much higher than last year’s 1.3 per cent, yet the number of policies remains static. This suggests that most of this employee growth is coming from employers who already have the cover, possibly as they actively expand their schemes to cover different sections of staff, or from a natural uplift in staff numbers driven by an improving economy. The increase in people insured is certainly most welcome, especially at a time when the government is starting to look more closely at the value of income protection, yet it’s clear there is still lots of work the industry needs to do to encourage more employers to buy income protection in the first place.