The group life market may be in robust health, but it does face an array of conditions driving change. Edward Murray investigates the developments that lie in store over the next year.
The group life market is alive and kicking, despite a downbeat economic environment that continues to exert pressure on it.
As far as the providers and advisers are concerned, it would appear this rude health is set to stay with the market for the immediate future. Although there are a number of interesting features in the current environment that will both drive change and lead to further evolution in the group life landscape.
When it comes to group life, there is no escaping the fact that employers continue to see it largely as a commoditised product and are focused keenly on premium.
Steve Bridger, head of group risk at Aviva, said softening rates have been a feature of the past five years and this has been exacerbated by a weak economy in which contracts are regularly rebroked to get the best rate possible.
But he feels the market is on the turn: "We have seen the beginnings of a hardening and I think it is representative of the fact that there is only so far you can go with a price before the risk actually becomes unattractive.
"There is an intention to get some stability into the market. While people might be talking about double-digit rises, I do not think they will be as high as that, as there is still a competitive edge to the market."
RATE RISES
The need for rate rises is underpinned by the changing composition of many group life schemes that have been driven by the faltering economy and the increasing retirement age.
Alan Thacker, senior consultant at Buck Consultants, said: "The situation with redundancies and people not being taken on means that scheme populations are tending to be more static and there are not more young people coming in.
"This tends to produce an ageing of the workforce. If you have a company where everyone becomes two years older, then it can drive an increase of 20% in costs and it does not take much of an increase in average ages to make a big impact on prices quoted."
Thacker said this situation is only going to deteriorate as people are less capable of retiring early due to constrained financial positions and the changes to the default retirement age allow them to work on for longer.
This is not an issue that has escaped the notice of Paul Avis, sales and marketing director at Canada Life. "Workforces have been ageing and we have seen the average age of our scheme members getting older," he said.
