The group protection market is grappling with rising costs, with significant premium hikes seen across all product lines, particularly in healthcare policies. The increases are driven by high medical inflation as well as a surge in usage and claims on these products. READ THE ROUND TABLE PDF SUPPLEMENT HERE
Delegates, at a recent workplace protection & wellbeing round table event held by Corporate Adviser at the House of Lords, discussed the need for more efficient pathways, better data utilisation, and collaborative digital solutions to mitigate cost, enhance accessibility, and engagement for both employers and employees. Collaboration among insurers, employers, and brokers was seen as crucial for creating streamlined, accessible solutions for both large and small companies.
Drivers
Delegates highlighted that healthcare premiums are significantly rising, impacting costs for both employers and insurers. Increased usage, compounded by challenges such as the cost-of-living and NHS crises, was identified as a key driver of these increases.
Beckett Financial Services employee benefit director Tracey Gloyne reported a 300 per cent premium increase in one client’s group PMI.
She said: “Healthcare premiums have increased significantly. Working with clients, we aim to keep those costs contained. We’re looking at options like income protection and using mental health services instead of private medical insurance, which will then further impact costs. As advisers, we understand those complexities, whereas clients often do not.”
Delegates agreed that businesses need to prepare for increased costs while advocating for pricing models that encourage usage without burdening customers. Meanwhile, insurers are urged to focus on genuine healthcare needs through integrated pathways and promote comprehensive healthcare journeys to reduce reliance on NHS services that are already overloaded.
Towergate principal health & wellbeing consultant Paul Bridges noted: “Businesses should realise that making products much more accessible is going to drive up cost. Prepare for those increased costs and increase your budget accordingly. I think that’s an education piece, that is a challenge. But until we can do that, helping them to navigate systems is useful. We still have to invest more to make sure these products are sustainable in the long term.”
Canada Life head of sales Matt Pincott expressed concerns over how current insurance models balance utilisation and rising demand. He underlined the necessity for a pricing model that encourages more usage without passing on costs to customers.
Pincott proposed a more modular strategy and innovation in service delivery to handle rising demand while meeting market needs in the long run.
He said: “We want usage to increase. We want to support more and more people. I don’t think any insurer would say anything different, but we need to think about, if we just keep bolting on more services and adding more and more things in, is that cost-effective for the long term and is it relevant for everyone?
“How can we make policies more relevant? How can we promote usage without any fear of any kind of future cap or future price increase coming in? We’ve just got to think a bit more creatively from our side.”
Gallagher benefits consulting team leader Anders Lewis stressed the need for efficient healthcare usage to avoid costs potentially doubling every four years, advocating for streamlined pathways to reduce unnecessary expenses. He said the challenge lies in presenting these cost-saving measures to clients without diminishing their perceived value.
He said: “The cost of healthcare will double every four years if it carries on like this with the number of people needing and using it. We need to make sure people are using it correctly. We need ti take data and then find a pathway to cutting out needless expenses. That’s what needs to happen.”
Simplyhealth head of clinical product & operations Dr Macarena Staudenmaier underscored the need to address genuine healthcare needs over expanding benefits or partnerships, highlighting insurers’ duty to prevent NHS overload and promote integrated GP-led diagnostic pathways.
She said: “We need to build more end-to-end journeys for people so that we can solve the real needs they have. If you’re going to see a GP, then a lot of the referrals that we see, for example, are for diagnostic scans. We’re going to make your specialist referral. If you have discounted scans then maybe you don’t need to go into the NHS and you don’t need to wait and you can get a scan privately, and then you can go back to that same virtual GP to see whether you really need a referral or if this can be managed within primary care.”
Delegates agreed that consultants play an important role in explaining these cost increases to businesses, highlighting not only the financial impact but also the strategic importance of the issues they face around recruitment and retention of staff.
Isio director Allyson Gayle discussed how some companies faced challenges with private medical insurance costs, prompting them to consider pulling coverage. But through consulting and analysing claims data, they found ways to mitigate the cost increases by adjusting workforce strategies and demonstrating future trend expectations to insurers.
Benefit impact
There was also discussion around whether rising costs will deter employers from considering additional benefits like wellbeing services, impacting overall employee support.
According to PIB Employee Benefits wellbeing consultant Suzanne Summerfield, there’s an increasing number of people caring for elders rather than children, creating a balanced shift in caregiving responsibilities. She said this shift, along with significant premium increases, is distorting the wellbeing landscape.
She explained that budgets meant for initiatives like diversity, elder care, and menopause support are being consumed by soaring private medical costs, limiting the implementation of other wellbeing programmes.
Summerfield emphasised that wellbeing initiatives should align with business objectives.
She said: “We’re not doing wellbeing just because it’s a nice thing to do. If the market’s going to mature and get more credibility, we need to be able to support the people that we’re working with to sit at the top table and talk business objectives, whether that is retention, whether that is attraction, which are two massive things, whether that’s about productivity or engagement.
“However you try to measure these things, the ultimate reason that we’re doing this is because we want people to be in work. We want them to be engaged, we want them to be productive, and we don’t want to pay loads of money on changing staff over all the time.”
Data transparency
The improvement of data transparency and the utilisation of it could be key in helping employers understand and manage the reasons behind rising costs according to Gayle. She mentioned the need for data to help businesses understand rising costs and its impact, noting that leveraging data can help businesses improve retention, recruitment, and workforce satisfaction by identifying areas for improvement and managing cost increases effectively.
She said: “The major missing link is data. I think we do have a rising cost in insurance premiums because of incidents and I think that is a challenge for clients and employers. I think if you can drive the data to help them understand why costs are rising, that pain point of cost then becomes more palatable.”
According to Lewis, insurers aim to use their data to guide patients to the most effective specialists and treatments, reducing reliance on GP referrals and promoting cost-effective outcomes.
He said: “The learning is in what the insurer knows through their data, what the best outcome is, who the right specialist consultants for that certain condition are that charge within what they deem reasonable and then just making sure people use those pathways. They want to use their own data to get to the right outcome.”
Mergers
Delegates also analysed the ongoing impact of mergers and acquisitions in the group risk sector, particularly highlighting the Aviva/AIG merger. Concerns were raised about possible premium increases post-merger, underscoring the consultant’s role in clarifying value propositions to employers amidst uncertainties about communication and employer reactions.
Gayle said: “Aviva is clearly in the driver’s seat here. I’ve seen their communications about what’s coming next, and for our Aviva clients, things seem pretty stable as long as it doesn’t impact service and the quality of the proposition. However, there’s some nervousness among the small pool of clients we have with AIG, and that’s more about the service plummeting right after the announcement.
“I feel the morale within the business is low. So the only thing that’s keeping things together, the saving grace for me, is that clients are saying, ‘Okay, cool, I’m going to Aviva, a bigger entity.’ So there’s hopefully some light at the end of the tunnel, but it seems to be quite a clunky transition.”
Gloyne highlighted that AIG, which had a tech-focused insurance offering, provided basic and cheap coverage whereas Aviva has more of a value proposition. She anticipates significant discounts from AIG as they navigate their strategy forward.
She explained: “Pricing-wise, AIG were a tech business. It was done online, as long as you didn’t need to actually engage with anybody physically, it did what it said on the tin.
“It was a cheap proposition and it provided some basic coverage. You’re not going to get that with Aviva. You won’t get the pricing, it’s one or the other: it is the lower cost premium or a more valued proposition.”
Political influence
Some delegates said they would like to see legislative changes, such as lowering Insurance Premium Tax (IPT) or amending P11D policies, which could relieve financial pressures on both employers and employees.
Gloyne mentioned the impact of high taxes on some plans, which may be up to 72 per cent depending on income, making it difficult for clients to implement cost-effective alternatives. She stated that reducing these tax barriers could be helpful, suggesting giving more responsibility to corporations to provide services while addressing the tax implications on P11D forms.
Gloyne also underlined the pressing need for enhanced mental health support, pointing out the gap in care when compared to physical health conditions such as stroke or cancer. She mentioned the long waiting lists for mental health care and emphasised the necessity of prevention and appropriate support given the prevalence of mental health issues in society.
She noted: “It was top of my list to say, mental health support, focusing on prevention. You’ll be put on a waiting list for three months, six months, or eight months. It doesn’t correlate with the amount of mental health problems there are in society at the moment. So it really needs to be a focus.”
Meanwhile, Pincott endorsed Labour’s stance on tackling double taxation issues relating to flexible benefits, emphasising continued industry efforts to address this long-standing matter.
He emphasised the importance of mental health in relation to income protection but proposed evaluating the inclusion of life insurance alongside pension schemes, similar to the auto-enrolment approach, to improve employee benefits comprehensively and consistently across all firms.