While economies worldwide are grinding to a halt the success seen in the strength of sales from Group Life Insurance policies could not come at a better time. Peter Carvill examines the reasons for this Click here to download pdf (PDF, 4,467KB)
It is nice to see someone - or something - doing well, especially in times like these when everything else seems to be faltering, or failing and being bailed out. It is also nice when someone - or, again, something - bucks the trend around it. In this case, both apply to sales of Group Life Insurance.
Sales of the product have been increasing for at least the last six years, according to figures obtained from Swiss Re. The reinsurer's Group Watch 2008 stated that the value of in-force premiums has, since 2003, been thus: 2003, £711.6m; 2004, £743.8m; 2005, £816.9m; 2006, £863.4; and 2007, £910.8m.
According to other figures given to Cover by Swiss Re, the figure for 2008 surpassed £945.2m.
A similar increase was reported in the number of lives covered under these products with the reinsurer reporting steady raises in the figures: 2006, 7.258 million lives covered; 2007, 7.416 million, according to Group Watch 2008. For 2008, the reinsurer has said that the numbers had increased again to 7.673 million.
So far, so good
So far, so good. But did 2008 do anything differently from the years preceding it? Not really, according to David Moran, national account manager at L&G: "Nothing really stands out but last year's increases were really just a continuation of the conditions that had already been going on."
He added that companies were now increasingly looking at what they were spending, and that there was a heightened awareness of overheads in the modern economy: "People are reviewing their products and lots of companies are looking at their insurances after one year instead of two in order to keep costs down. We'll try to do what we can to help wherever it is possible."
But, he added: "This year is a whole new set of circumstances. We'll have to see what happens but we're already starting to see companies cutting back with redundancies and the levels of benefits they do supply. That will, unfortunately, have an impact on this year."
The overriding theme
If there is one overriding theme of what is to come, one thing that is going to dominate every move, development or change in the protection industry, then it is the global recession that is engulfing us.
"I think, realistically, that this year is going to be a tough one," says Nick Homer, group risk development manager at Zurich, "In terms of what we have seen, we saw a slight reduction in scheme numbers. But we did continue to see an increase in the number of people covered. I think this year will prove to be an interesting one. I don't think the figures will be significantly different from 2008 but, right now it's still relatively early. I don't have an expectation of great growth this year."
He added: "I think because of its value and with it being the bedrock of employee benefits, group life will stay relatively stable. Inevitably, we're going to be in the situation of redundancies and early retirements. It is something that employers should be mindful of if they are unfortunately losing staff. They, the employers, should seek to provide that cover for a length of time and staff that are made redundant should have that protection while they seek alternative employment."
Defending the environment
Companies, Homer says, should be continually aware - or made aware of - the benefits of group life but there are a number of issues around proposed legislation that will deal with discrimination in the workplace. "The biggest thing for the industry is defending the environment in which it operates. Group life is such a valuable benefit that employers should be encouraged, and even given incentives, to provide it but there are pieces of legislation that are being proposed around discrimination. The sentiments in those pieces of legislation are right and we support the eradication of discrimination in the work place. But we have to make sure we are not given barriers in providing benefits to people."
So where will this year go? "We're all mindful of the current climate," says Homer, "but this product is the bedrock of employee benefits. I see the market remaining strong. The other great thing about this product is that with people living longer, long-term sustainability should not be an issue; Group Life is a very affordable product in this way - it also gives people access to cover who otherwise wouldn't have access to it."
The recession, says Moran, could offer one area of potential growth for the product but it is important that flexibility remains key at this time. He said: "One area of potential growth is the number of management buyouts where bits of businesses are being sold off. There are opportunities out there but I think it is about being as flexible in these situations as much as possible."
