Another record year for the group risk market
Today, Swiss Re launches Group Watch 2024, analysing the group risk market (life assurance, long-term disability and critical illness) at the end of 2023.
This year's report presents the market data in the context of another period of difficult economic conditions for employers, described by my colleague Diana van der Watt with inflation remaining stubbornly high at 7.3%. Against this background, the results show the value placed by employers on group risk benefits to attract, retain and support their workforces.
The number of members insured and benefits increased across all three product lines with an additional 893,268 people insured compared with 2022. ??
Long-term disability income (LTDI)
The number of LTDI scheme members increased by 201,377 (6.6%), taking the total number of people covered to 3,255,185.
Insured benefits in force increased by 12.5%, with premiums increasing by 6.6%.
The average benefit per annum per member increased by 5.5%.
Death benefits
Lump sum death benefit scheme members increased by 579,083 (5.5%) taking the number of people covered to 11,083,680.
The average lump sum death benefit per member increased by 7.0%.
Insured lump sum death benefits in force increased by 12.9%, with premiums increasing by 13.3%.
Dependants' death in service pension membership continued to decline in 2023, decreasing by 41.1%. There are now just 74,403 remaining members.
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Critical illness cover
Critical illness scheme members increased by 164,817 (22.4%) taking the total number of people covered to 901,387.
Insured critical illness benefits increased by 14.2% with premiums increasing by 15.9%.
The average in-force sum assured for critical illness fell by 6.7% from ￡76,433 to ￡71,316, in part as one additional product provider shared data where the average sum assured was lower.
Comment
The increase in LTDI scheme members is very encouraging. Workplace policies also bring the additional benefits to help people to remain in work and to support them returning to work as and when they are able to do so.
The Government could do more, though, to help employers by widening the health narrative to recognise the important role that vocational rehabilitation plays in supporting workers and ensuring that the tax system treats both occupational health and vocational rehabilitation services consistently.
The Government could also do more to support smaller employers by increasing the current ￡50 P11D limit applying to employer-funded products such as critical illness insurance.
The report calls for the Government to reconsider the tax treatment of contributions made by members using salary sacrifice to extend their LTDI benefits. For the second year running, the percentage of overall schemes offering this facility has reduced, with the double taxation of premiums and benefits a barrier to what could otherwise be greater personal resilience as some employers reduce the maximum benefit payment period.
It was good to see this picked up in the DWP Select Committee report on SSP published on 28th March and we await the Government's response due by 28th May.? ??????????
Excepted (non-pension) Group Life policies (EGLP) grew much faster than Registered Pension group life arrangements (15.3% and 2.6%). The trend towards EGLPs should continue given the potential tax liability for benefits above the limit now known as the Lump Sum and Death Benefit Allowance.
The report estimates an annual cost of ￡4m to administer and assess the potential periodic tax liability on discretionary trusts holding EGLPs and, once again, the report calls on the Government to exempt all trusts holding pure protection policies, and to simplify EGLP administration further by abolishing the requirement for a common benefit formula to apply to all members.
Greater transparency leading to more awareness is a further theme with calls in the report for improvements to so-called day one statements of sick pay, making them available to all workers, and for updates to be provided when sick pay provision changes.
The report reinforces a recommendation by the Building Resilient Households Group in its "Low financially resilient households report" sponsored by the Chartered Insurance Institute and a consortium of insurers, for details of employee benefits such as sickness arrangements to be included by employers in annual reports.? Such transparency would be helpful for shareholders and the wider public and help to drive good practice and employee awareness.
Flexible actuarial resource
7 个月Ron, is there any indication of the drivers of the increase in numbers of members insured? I suspect two main forces: 1. Growing risk aversion - employers insuring previously self-insured schemes. 2. Movement of employees to "safer" companies - i.e. reducing numbers of contractors, shrinking numbers of small employers, etc. I guess indications would come from numbers of "new to market" large schemes, and higher relative growth amongst existing large schemes versus small schemes.
Director of Wellbeing
7 个月As always, extremely valuable insight
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7 个月It’s remarkable how little premiums are rising on these schemes compared to uk wage inflation. No wonder employers are looking to add these benefits as a way of improving their employment package.
Ron, Great work, as usual! Congratulations. Vital data. Coukd I ask just one question - whether the statistics include public sector schemes? Question prompted by the sharp reduction to Dependant’s DIS pensions. Which I am very sorry to see are now close to non existent.
Senior Public Affairs Advisor
7 个月Tx for sharing your expert insights, Ron Wheatcroft. Much appreciated. Great to see the financial safety net of insurance could be expanded. That's our core mission: to make the world more resilient.