Group Life - Bowling everyone over

“Specifically, employers are not recruiting younger employees, as can be seen by the record levels of youth unemployment, and older workers may not have the pension pots to enable them to retire, so are choosing to continue working. This is the single biggest determinant in rating group risk business.”

PRODUCT DEVELOPMENTS

In terms of actual product developments, there have been a number of interesting ones. Aviva has led the way for online submission of claims, doing away with the need to supply paper death certificates.

This is surely something that will become a standard in the coming months, and it is certainly something that Legal & General is moving towards, as Glen Laming, employer services director, group protection management team, explained.

“We are a long way down the line to speed up the payment of the claim in the same sort of way and that is the way the market is moving.”

Laming also highlighted the employee assistance ­programme that Legal & General offers as an add-on benefit to its group life product, which he said is something that sets it apart from others and can really help add value to employers conscious of their overall benefit costs.

“Where employers want to make sure they are not paying for the same benefit twice or where they are looking to make savings, then really looking at the additional benefits on offer is something I would really encourage.”

As well as some development around add-ons, there is also movement in the flexible benefits market. This is going to become a more important route to market for many providers in the years ahead.

Friends Life has already seen the impact of this. David Williams, director of group protection, said it has been beneficial from  both an employer’s and employee’s point of view.

“Wider take-up of flexible benefits has also helped as this has had a positive impact on cost management. This has enabled employers and employees to put in place a tailored package of benefits.” He added: “One clear trend that we are continuing to see is the movement from death-in-service pensions to lump sum benefit provision as employers look to de-risk their liabilities.”

Alongside the move to lump sum benefits, Williams also believed the introduction of auto-enrolment will have an effect on the group life market as employers will have to look at their group protection arrangements if benefits are linked to pension scheme membership.

He said the exact impact is hard to predict, but felt it could provide a welcome shot in the arm and, at the very least, promote employers to review the benefits they offer and to standardise them.

In the longer term, it may be that providers look to alter the way they underwrite group schemes altogether. Ellipse has led the way in this regard since it entered the market in 2009.

Rather than operating from a unit price for each member, it seeks to base its premiums on the age of each member and to use a technology dependent model to ensure all of the administration and processing this requires can be handled cost-effectively. 

Peter Fenner, communications manager at Ellipse, said: “We do see our model becoming the future standard for group risk. With the advent of benefits platforms, whose use will grow further as pensions auto-enrolment kicks in, clients will demand a low-cost, fast and efficient service that can happen only if processes are highly automated.”

Whether this turns out to be the case remains to be seen. Certainly, it will take time for there to be a wholesale change to a different standard. But it is encouraging that in a market that is so highly commoditised, there is still a lot of work being done to explore new possibilities and bring developments to the fore.

Despite the pressure on premiums and the impact the recession has had on employment levels, life insurance remains a key employee benefit and a corner of the group market.