With so many group life assurance schemes now in force, Adele Burton asks whether there is any room for further growth in the market.
The expected surge in the group life assurance market as a result of the introduction of Stakeholder pensions has not been as big as providers initially hoped for.
This time last year it was predicted that the Government's Stakeholder pension initiative would lead to a significant increase in life assurance sales but price still remains the determining factor for growth.
'Stakeholder has only had a marginal impact. It may have given some employers an impetus to set up an employee benefit scheme but the group life market is already big and it hasn't made that much of a difference,' says Peter Anderson, head of the corporate marketing team at Royal & SunAlliance.
However, Chris Parker, group risk manager at BUPA, believes that the introduction of Stakeholder has opened doors for intermediaries in life assurance. 'Stakeholder has provided opportunities,' he says. 'If employers are providing pensions for people who they were not providing for before, it gives potential for new life assurance business.'
The biggest change in the market has been prompted by the terroist attacks in the US. The events of 11 September affected the life assurance market more than any other protection market ' especially the larger schemes.
Jane Dale, group risk director at Legal & General, says: 'September 11 affected only the very large schemes. There has been a recognition of the risks involved in companies having employees in one location ' mainly in London.'
Parker agrees. 'Catastrophe risks are an issue following the incidents of September 11,' he says. 'People are looking at their policies after this and are considering what would happen if terrorist activities were to take place in this country.'
Despite the introduction of Stakeholder and the events of 11 September the market has continued to grow, albeit only marginally. It has grown steadily over the past few years and last year expanded by just over 7% in terms of premium income and by 8.5% in terms of the number of schemes.
Anderson believes that the relatively slow growth in the industry is a result of the large number of people currently covered by life assurance schemes.
'The big problem is that so many people have got life assurance policies. Market statistics suggest there are nearly 52,000 group schemes currently active in the market. Prospects for growth are not particularly great. It is a big market already and the opportunities for growth are in other areas such as group critical illness,' he says.
As the market is steered by price, competition among the top players remains rife. The leading 10 providers account for almost 90% of the market and competition at the top ' particularly among the top five firms ' is strong.
Anderson says: 'The market is horrendously competitive. Most products are fairly standard, a lot of the differences are in quality of service and support for the IFA. This is where added value comes in.'
Providers do appear to be focusing on IFA service as a means of standing out from the crowd and Dale says providers are adding new services as a means of adding value. 'Some providers are trying new things in order to improve services,' she says. 'For example, we have launched a voluntary scheme where the employee pays for the policy themselves and we have seen a lot of interest in this.'
IFAs also appear to have more help on the technical side of the sale. One good trend which is emerging is providing technical advice to intermediaries in terms of technical guides. Explaining technical terms and free cover limits means they are much more informed and able to compare one type of cover with another.
Employers are also always looking for increased value from providers and Anderson says that IFAs need to ensure that if switching a benefit from one insurer to another, all angles should be covered by the IFA. For example if a client has a special requirement as part of their policy, this must be included in the new policy.
The use of the internet has also taken off in recent years, with providers using this as a tool for boosting business potential and service levels.
Anderson says: 'There has been an increased involvement of electronic information over the last nine to 18 months. The increased availability of websites has provided brokers with forms they can download which helps add quality to the process.'
Group life insurance is one of the first employee benefits employers tend to put into place as it is seen as a valuable benefit, with some employers insisting on it as a core benefit.
Adele Burton is staff writer
