As embattled employers look for ways to offer low-cost employee benefits, group critical illness could be just the ticket. So why is the GCI market only one-twentieth the size of group life? Nicola Culley investigates.
Affordable flex systems, auto-enrolment and stagnant pay rises could amount to the perfect storm for group critical illness. Embattled employers are looking for low-cost fillers to offer employees in place of salary hikes, and group critical illness (group CI) could be just the ticket.
Plus, the auto-enrolment shake-up later in the year will mean employers taking a long, hard look at benefits packages – cue the integration of flex systems, which has been a significant driver of group CI growth.
Employers have long known about group income protection and group life. Group critical illness is the third wheel of a neat trio of bottom-line benefits, but has yet to gain significant traction in its immature state.
According to Swiss re, group CI is one-tenth the size of the group income protection (GIP) market and one-twentieth of group life. Yet it has been the only benefit since 2007 that has grown each year, and 58% of it has been aligned with flex schemes.
Paul Avis, sales and marketing director at Canada Life, said: “Most employers are not giving pay rises, or very small ones, and we have come through a very soft GIP and life market. If an employer can make savings in those, it can be reinvested in group CI. Employees value CI and employers can implement a fixed and attractive benefit.
“For example, single employees do not value death in service so group CI is something for them.”
Keeping employees happy
He added the demise of defined benefit pension schemes has meant employers are scouring for new things to keep employees happy. Group CI customised benefits packages, Avis explained, and their affordability should promote continued growth.
But there have been two notable barriers.
Pre-existing condition clauses that cannot be claimed for have not been readily understood by employees. And the great and powerful flex system movement was not all that accessible or affordable to smaller companies.
Avis said helplines and information points provided by insurers have eased the lack of understanding, and this element was a must to support the product.
On the flex side, things may be looking up.
Elliott Silk, director of employee benefits at English Mutual Financial Planning, said flex had been billed as the next big thing; the low-cost way that would transform employee benefits. But in practice, he said, it had been expensive and inaccessible for SMEs.