Market surveys are nothing without analysis. Paul Avis finds Swiss Re's latest highlights a few worrying trends in group markets but also a number of opportunities.
There is also plenty of scope for market development, some real good news at last. So when making savings on life and disability schemes the opportunity to recycle this into an additional benefit exists through proactive critical illness quoting.
The second area of good news is the continuing success and evolution of flexible benefit group risk arrangements.
Market premiums for group life have increased from £47.5m in 2008 to £66.1m in 2011 (a 39% increase); group income protection premiums from £37.9m to £54.4m (43% increase); and group critical illness from £21.5m to £31.8m (48% increase).
The flex market now represents £152.3m – around 10% – and so is a clear opportunity for advisers working in this space. On a cautionary note it is imperative that advisers review the flex capability of insurers. Unlike pensions and private medical insurers, group risk underwriting can delay quotes and implementation. Capability is a key determinant in the assessment of a group risk insurer flex provider.
Real opportunity
In addition, the communications opportunity for flex clients is massive with online employer/employee access, total reward summaries of additional benefits etc. This all provides a real opportunity to celebrate risk insurer value and maximise innovative media.
In summary, the group life and income protection markets, which on the surface seemed to have stabilised and grown, are masking a soft market. Premiums are significantly lower than previous market highs, where significant macro conditions (such as ageing workforce and diminishing investment returns/increased cost of capital) are not being adequately reflected.
On the positive aspects, the critical illness market’s popularity with employees, affordability and low market penetration, presents advisers with an opportunity. Also, the increasing penetration of flex scheme group risk business should be worth exploring.
As a final point, the by-product of a soft market is an industry-wide reduction in commission generation. While insurers can express concern about the need for rates to harden, the benefits of this for advisers should be an organic increase in revenue streams.
We are in this together – a sustainably priced group risk market will support employer budgeting, provide adviser remuneration to enable growth and ensure this area of business is viable in the long term.
Loss of premium – 2008-2011:
