Providers are tackling a static group income protection (IP) market by focusing on short-term payout...
Providers are tackling a static group income protection (IP) market by focusing on short-term payouts, writes Peter Carvill.
Companies have been trying to increase sales from a mere 6% to 7% of the possible market by introducing a roster of major adjustments to their offerings, including reduced-term benefits, a shorter deferment period and a raft of services to help employees return to work.
Previous products had a benefit term that was valid until retirement age but Bupa and Unum have started to offer IP with reduced-term benefits of two to five years.
Likewise, older group schemes had deferment periods of 13 to 26 weeks, while the Unum product for example can be activated after a fortnight.
Colin Micklewright, head of group IP business development at Canada Life, said: "We've seen a great deal of business conducted on limited-payment terms, so these benefits are not new, but they've become popular over the past five years.
"The industry has 21,000 schemes in the group IP sector, and it has been a fairly stagnant market. Consequently, we are trying to attract new clients, particularly with some schemes being wound down in the past."
A number of factors have been identified as influencing the growing popularity of limited-term group IP among employers, including the changing nature of work.
John Matthews, UK health and benefits leader for the southern region at Mercer Human Resource Consulting, explained: "From a simplistic level, the idea of a job for life doesn't exist anymore, and there's a general acceptance of job mobility. With that backdrop, why would an employer choose to look after their employee for more than five years?"
According to figures obtained from Unum, market penetration of group IP in the UK currently stands at 20,000 employers with five or more staff, or just 6% of the total number.
