Progress is definitely being made by the group critical illness (CI) market as statistics from Swiss Re’s Group Watch show (see Box) In-force group CI policies (both employer-paid and voluntary) were 11.6 per cent higher last year than in 2021, and have nearly doubled since 2013.
But CI still only accounts for 6.5 per cent of all group risk policies. So, success stories are commonly accompanied by qualifying statements.
For example, LifeSearch reports increased group CI sales of around 50 per cent post-Covid but acknowledges this has been from a low benchmark and that the product is still well down the employer pecking order – below group life, income protection, private medical insurance and “probably even dental insurance”.
Providers are still failing to cash in on massive untapped potential, and most don’t regard CI as a priority.
Indeed, MetLife and Zurich don’t even offer it. MetLife has no plans to introduce it and, whilst Zurich is more positive, it has mentioned future participation several times in the past. Furthermore, half the current providers don’t seem too keen to promote their wares – with Unum, Canada Life and Legal & General not accepting invitations from Corporate Adviser to comment.
But AIG Life is highly enthusiastic and feels other providers need to escape from a vicious circle.
Chris Morgan, head of group protection distribution at AIG Life, says: “I think the long-term future of this product is good, as it’s popular in the individual market, and people understand the basic concept better than income protection. But insurers believe it’s not that popular so they don’t promote it, even though I think it might resonate with quite a few employees.”
Unheralded positives
Insurers should take heart from the fact that, although the bulk of group CI is sold through voluntary flex schemes, the cost-of-living crisis hasn’t resulted in employees cutting back on it.
A widely predicted claims backlash from people not getting prompt medical attention during lockdown has also failed to materialise. But we may not be out of the woods yet.
Jason Ellis, group protection sales director at Aviva, says: “We anticipated there might be a slight uptick in cancer-related claims due to delays in diagnostics during the pandemic, although this has yet to play out this year. This may be due to the NHS prioritising cancer diagnosis and urgent care during this time.
“However, an important trend the market will be keeping an eye on is that we are seeing an increased frequency and higher average benefit paid on claims. We may also see an increase in claims in the future if there are longer-term effects of Covid that increase the likelihood of strokes and heart attacks.”
Barriers and opportunities
Two of the major traditional barriers to selling group CI are the exclusion of pre-existing conditions and – on employer-paid cover – the P11D liability. But neither is insurmountable.
David Williams, head of group risk at Towergate Health & Protection, says: “Both are negatives but we haven’t heard them expressed too verbally. If people want group CI they tend to push on regardless of these issues.”
Additionally, the lack of availability of portals for smaller businesses, which is another dampener, should prove temporary. Mattioli Woods, for example, reports a fourfold increase in clients having their own platforms during the last two years.
Technological development could also benefit underwriting, and there’s plenty that insurers can do about making quotes more widely available for voluntary schemes for SMEs, chasing medical reports, and pushing more limited sums assured to address fears that payouts can disincentivise employees from returning to work.
Alan Richardson, head of business protection & group at LifeSearch, says: “Getting GPRs back can easily take a couple of months, and I’m not convinced insurers are sufficiently proactive in chasing these down. But use of technology has allowed us to advise on CI to many more micro-SMEs.
“We are starting to do more small amounts of critical illness cover, with sums assured of around £10,000, alongside group income protection, so there is no incentive not to return to work, and less of a P11D issue.” There is clear evidence that when the product is effectively communicated it can be every bit as attractive as other health-related benefits.
This June, for example, Mattioli Woods introduced a purely voluntary CI scheme for 130 members for an East Midlands based organisation with an average employee salary of around £30,000. Heavily communicated via a full-flex platform, it achieved a take-up rate of 30 per cent.
Need for innovation
Provider innovation could be just what is needed to raise the sector’s profile but, whilst there have been minor cover tweaks, the only major development during recent years has been AIG Life’s 2021 move to bring a simpler approach to group CI by matching it’s individual offering.
Morgan says “We looked to group some similar conditions together, based on how they impact the individual, so that it doesn’t matter what something is called. It essentially means if someone has a rare condition not listed on the policy then it’s covered. We’ve had some really good responses from advisers.”
Other providers haven’t followed suit, although there have been some improvements in definitions and severity criteria. LifeSearch, for example, reports recently having a heart attack claim paid by Canada Life which, prior to its more relaxed conditions, would have been excluded by insufficient troponin levels.
If providers don’t try to kick-start this market it is hard to see the government doing the job for them.
Swiss Re has asked HMRC and the Treasury for an increase in the £50 ‘de minimis’ threshold – below which there’s no P11D liability – but has never received any encouragement back.
Group Risk Development (Grid) has also recently made the case for group CI to be included within the scope of the HMRC/Treasury consultation on how the tax system might be adapted to support occupational health. But, with most government efforts focusing on policies likely to win the next election, no-one should be holding their breath.
However, Richardson is aware of “At least one of the big insurers looking to further develop its CI.” Hopefully this will unleash significant innovation, and also explain some of the radio silence!
BOX: The vital statistics for group CI
According to Swiss Re’s Group Watch 2023:
▪ The number of in-force policies increased by 11.6% in 2022 over 2021
– from 5,088 to 5,678
▪ Sums assured increased by 9.7% in 2022 over 2021
– from £51,301,484,266 to £56,297,950,738
▪ Premiums increased by 11.6% in 2022 over 2021
– from £154,557,045 to £172,492,619
▪ The number of people insured increased by 5.6% in 2022 over 2021
– from 697,304 to 736,570.
The longer term perspective for group CI (figures again from Swiss Re)
▪ The number of people insured increased by 92.5% between 2013 and 2022
– from 382,624 to 736,570
▪ The average sum assured increased by 18% between 2013 and 2022
– from £64,530 to £76,433
▪ The average premium increased by 33% between 2013 and 2022
– from £176 to £234.
Ron Wheatcroft, technical manager at Swiss Re, says: “Group CI is an inclusive product but it’s very important that employee benefit consultants adequately explain the pre-existing condition exclusion. Demand has been growing quite fast but it’s still very poor compared with the individual market. We haven’t really seen much innovation, and that’s what we need.”
