The number of people covered by corporate group risk policies increased by 3.3 per cent in 2018 – or almost half a million people – according to the latest sector report by Swiss Re.
The company’s latest Group Watch report showed that there were an additional 408,518 employees covered by group risk policies in 2018, bringing the total covered to almost 12.9m members.
The report shows that there were modest increase in long-term disability income policies (up by 2.2 per cent), critical illness policies (up by 4.8 per cent) and lump sum death-in service benefits (up by 4.7 per cent). However there was a more significant decline in the number of of members covered by dependants death in service benefits – with numbers decreasing by 29.7 per cent.
However the report also highlighted significant growth in the number of members covered by expected group life policies.
The Swiss report also detailed the total market premiums for each product line. By the end of 2018, these were worth £761,125,005 for long-term disability income premiums, an increase of 5.1 per cent on the previous year.
The value for lump sum death-in service premiums were £1,324,584,331 (up 8.7 per cent) while critical illness premiums stood at £112,952,864 (up 10.8 per cent).
The value of dependants’ death-in-service premiums were £138,550,608 – down 17.1 per cent on the previous year.
Swiss Re’s technical manager, and author of the report Ron Wheatcroft says: “Overall, the results are solid. Respondents to the market survey among providers and intermediaries referred to the very uncertain business environment in which many of their clients were operating.
“This has seen a number of decisions deferred and a reluctance to take on new commitments until the business environment becomes clearer.”
The figures show there was particularly strong growth within the death in service benefits market. The number of members of Excepted Group Life Policies between 2017 and 2018, with the number of members increasing by 27.2 per cent to 995,203 people.
The number of in-force EGLPs increased by 21.8 per cent from 7,130 to 8,686.
Although registered death-in-service policies still provide lump sum death benefit cover for most employees, EGLPs have now become an established way of providing death benefit cover through workplace arrangements.
Wheatcroft says: “Employer-sponsored death-in-service benefits have a vital role to play in protecting families against the financial consequences of an early death.”
He says this report highlights two trends this year: the decline in dependants death-in service pensions and the growth of EGLPs.
“While this business line [dependants death-in-service benefits] has been in decline for many years, 2018 saw that decline accelerate as larger policies closed and were replaced by lump sum death benefits. While the number of members fell by 29.7 per cent, the number of policies fell by 10.6 per cent.”
Wheatcroft says 2018 also saw further growth in EGLPs as the market seeks alternatives to DISP arrangements and to pension-related death benefits.
“This reinforces the need to continue working with Government to obtain an exemption for such arrangements from periodic, entry and exit charges on the discretionary trusts holding such policies.
We estimate the annual cost of compliance for EGLPs alone to be £2.1m with further costs of a similar magnitude for legal advice. Yet, the revenue generated is tiny and no more than £1m per annum. As the market continues to grow, the disparity between costs and revenue increases.
“In responding to HMRC’s consultation on the taxation of trusts earlier this year, we reiterated our recommendation for an exemption, suggesting this be granted for all discretionary trusts where the asset is one or more life policies which can only pay out on death or disability.
“This would remove a burden from employers using EGLPs who are simply trying to do the right thing for their workforce by arranging life cover to protect their families and dependants and where the potential tax charge is both random and arbitrary.”
Commenting on this latest report Group Risk Development (Grid) spokesperson Katharine Moxham says: “2018 has indeed been another year of positive growth for the group risk industry, with around 408,500 more employees enjoying the financial peace of mind that group risk protection benefits bring.”
But she adds: “It is disappointing, however, that employers say that uncertainty around Brexit is holding them back from implementing group risk protection products.
“Workers still need a means of protecting their household’s financial position against unexpected death, disability, injury or illness, regardless of politics. We would urge employers to look at what’s going on alongside Brexit negotiations, where increasingly, Government is looking to employers to help meet its ambitions for a healthy and inclusive workforce.
“As supporting the health and wellbeing of staff, and, in particular, mental wellbeing, moves up the workplace agenda, employers are increasingly looking for help in how to do this, and a lot of the answers can be found in group risk protection products.
“The support services that come with [these products] significantly extend the reach of the help employers can give to their employees.”