The Flexible way?


Group CI has seen steady growth in the past year or so, but why? Nicola Culley investigates and assesses whether the increase is sustainable.

It has been quite the year for group critical illness (group CI). Often thought of as the ‘harder sell’ of the group life and group income protection (group IP) benefits trio, group CI premiums have shown strong growth in 2012. Advisers, too, are reporting a bit of a lift in take-up lately. But can a market driven primarily by flex systems see continued growth at the same notable rate since 2007?

Swiss Re’s Group Watch 2013 showed very strong premium growth in in-force premiums for death benefits, long-term disability income and CI protection in the UK market for 2012.

Group death benefit premiums increased by 9.8%, while long-term disability and CI premiums also showed very strong growth of 8.7% each for the year.

Steve Bridger, head of group risk at Aviva UK Health, said the most obvious trend in group CI is the strong, albeit small, growth in the market.

Flex benefits extend to SME space

As the group CI market continues to be primarily driven by employer integration of benefits flex systems, Bridger said the most encouraging factor currently is the increasing amount of benefits systems, particularly those now catering for small employers.

He said: “We are seeing the threshold for flex benefits coming down from historically being a bit costly and taken up mostly by larger employers, to now opening up opportunities for advisers in the SME space.

“Advisers are talking to SMEs more now because of auto-enrolment, so it is a good opportunity to be talking about flex packages and group CI in that.”

According to Bridger, the initial pull with employers is how the adviser engages with them from a consultancy point of view. It is a case of the adviser looking at the full health and wellbeing picture, he explained, not just selling individual group schemes, such as CI.

He said: “And then it is about communication between employer and employees. Advisers are starting to brand their own platforms, which builds the relationship with the employer further, and the relationship between the employer and employee, too.”

However, Bridger added that there will be no direct impact from auto-enrolment yet. As many have already observed, auto-enrolment will be more of a driving force for pension-linked schemes and benefits such as group life and perhaps group IP.

Although group CI can be seen as an easy sell from employer to employee, with cheaper access to cover and easy-to-explain features, tight purse strings, especially among the SMEs, could prove a barrier to sales due to extra auto-enrolment cost burden.

Bridger said: “Auto-enrolment will open opportunities for advisers to be talking about flex and CI. Whether it encourages smaller employers to take it up at the moment is another matter, because they have already squeezed budgets. But auto-enrolment can only be seen as an opportunity rather than a problem.”

Aviva now is looking at ways to innovate in the relatively new product area. Bridger said there has been little innovation so far in the market, and that there is room to take a more creative approach.

The main problem with group CI, Bridger added, is that it does not drive people back to work.

“We are looking into different ways to approach it, so for instance, perhaps it could be sold more as a ­complementary benefit to group PMI, so the lump sum could be seen to help with limited cancer pay-out. Should it just be seen as a general group risk product? Or is there room to approach it more creatively?” he asked.

“There is no clear answer yet, but in terms of customer need it is about asking what more can we do with it? In an employer’s mind it is an employee benefit only, and it is seen as a complimentary flex benefit.”

Group CI stumbling block

Bridger added that the other stumbling block with group CI, is that it is sold to clients who would typically already have group life and group IP, so it is not exactly sold with new virgin business.

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