Opinion is divided on the state of the group critical illness (GCI) market. While some point to low penetration and employer pressures as signs it will stall, others believe the time is right for market growth.
These differences can be seen in the latest Swiss Re’s Group Watch report. Sales figures for 2024 point to growth, with an uptick of 7.8 per cent in the number of policies in-force, but comments from some employee benefit consultants suggest sales will slow.
Mark Simmonds, director of health and benefits at WTW and a member of the trade body Group Risk Development’s regulatory committee, is among the optimists. “It is the smallest group risk product with the shortest track record but, as awareness has grown, so have sales,” he says. “Since 2015, the number of GCI policies has more than doubled and nearly a million people now have cover.”
Insurers’ expectations around market performance are also split. While AIG and Generali exited the market in the last couple of years, with their GCI business acquired by Aviva and Unum respectively, Zurich Corporate Risk bucked the trend with a product launch in October 2024. “It was a natural development for future growth,” explains Nick Homer, head of corporate risk market management at Zurich. “Our group life and income protection products were growing rapidly so it made sense to add GCI.”
Price sensitive
The nature of the product means that premiums are stable. Unlike medical insurance where inflation drives claims costs, or group income protection, where there’s a risk of a claim being paid for years, GCI pays out a set lump sum so insurers’ liability is capped. This set liability also means that interest rate fluctuations have little bearing on insurers.
However, cost is one of the key issues leading to doubts about future growth. With employers already facing budget pressures, premium increases can be a major turn-off. “There is an upwards trend on pricing, with increases coming through at rate reviews,” says Terry Fromant, head of group risk at Brown & Brown Health and Employee Benefits. “Only a small percentage of our clients do have GCI, but those who do, really value it.”
Claims uncertainty
These premium increases are down to several factors. As well as increased operating costs, the pandemic has introduced more guesswork into underwriting. “Pricing on previous experience works great unless there’s a disruption such as the pandemic,” says Chris Morgan, head of product and proposition strategy at Canada Life. “Around 70 per cent of GCI claims are for cancer, so with people missing screenings or getting diagnoses later, it has affected underwriting.”
While the pandemic meant claims fell in 2020/21, they then appeared to play catch up once restrictions were lifted the following year. “It is difficult,” adds Morgan. “Underwriters need to understand whether it’s just rebalancing or more of a long-term trend.”
Size stability
Insurers may be taking different stances on future claims trends but there are other factors helping to ensure stability, including the size of a potential payout. “In most cases, an employee won’t be looking for a huge payout ,” says David Williams, head of group risk at Towergate Employee Benefits. “Replacing their salary for a year gives them enough to cover wages if they’re unable to work, pay for treatment, or put adaptations in, if needed.”
This means the cost of cover is usually relatively modest for employers, typically under 1 per cent of payroll. Additionally, with flex and voluntary schemes accounting for nearly 70 per cent of those covered, employers won’t necessarily feel the pinch directly.
Product development
GCI insurers are also keen to offer value that goes beyond a financial payout. “There’s much more focus on providing support services,” says Simmonds. “Many now offer a suite of added-value benefits, such as health and wellbeing apps, second medical opinion services and digital GPs, that complement the product.”
This makes sense. In 2024, insurers handled 2,290 claims according to data from Group Risk Development (Grid) – a figure that represents just 0.27 per cent of the insured population. Adding these services ensures that employees get value from the product, whether or not they need to claim.
Williams believes this is an area where there could be huge developments in the future. “Artificial Intelligence could make early diagnosis much easier,” he explains. “Employees could be alerted to risks, potentially helping to prevent some serious conditions.”
Cover enhancements
Insurers are looking at how they can enhance core benefits, with Zurich, allowing employees to select up to £50k of child benefit.
Williams welcomes this, saying this is a key element of GCI. “If a child is seriously ill, it’s highly likely that their parent will need to be off work. A GCI payout can be a massive benefit.”.
With cancer behind so many claims, insurers are also looking to differentiate on associated benefits. Both Aviva and Zurich include a cancer drug fund option, giving employees access to up to £100,000 for recommended drugs unavailable through the NHS.
Additionally, Zurich is rolling out Precision CancerCare, making genetic testing available for claimants with stage three or four cancers, enabling more personalised treatment.”
Greater transparency
More work is also underway around employee engagement. The pre-existing conditions exclusion has long been an obstacle for take-up, with sceptical employees convinced insurers will use this to wriggle out of paying a claim.
To address this, Zurich included its Ask Ahead service when it launched. This can help employees understand how their health might affect a future claim. Morgan expects to see more market focus in this area. “Commercially it makes sense as it could help to grow the market, but it also supports our responsibilities under Consumer Duty,” he says. “The more consumers understand how the pre-existing condition exclusion works, the better.”
Growth opportunities
Despite financial pressures on employers, many see opportunities for further growth in GCI, particualrly given the current strains on NHS services. Williams says: “Employees are more aware that they can’t rely on the state and they’re turning to their employers for more health benefits.”
The stable pricing on GCI could also give it a boost. Homer says that where employers have put medical insurance in place, some are feeling the pain from rising premiums. “The PMI bubble could burst, which will open up opportunities for other health products, including GCI,” he adds.
More effective communications are also key to driving sales, especially with around 70 per cent of cover arranged through flex and voluntary schemes. “Insurers are doing more to help employers explain the benefits to their workforce,” says Simmonds. “This will help to drive employee engagement and take-up.”
Group critical illness by numbers
- 839,872: people covered by GCI in 2024 – up 4.0% on 2023*
- 2,290: claims in 2024**
- 6,711: policies in-force – up 7.8% on 2023*
- £179.2m: paid out – up £18.9m over 2023**
- £78,253: average claim payout in 2024**