Nicola Culley asks if the introduction of auto-enrolment will deliver new business to the group life market or if employers burdened by the extra costs will cut back.
“Auto-enrolment has given the market an opportunity to grow but there is the risk that what we gain we could also lose.
“There is not a massive amount of new business on the horizon, it is more about existing business churning when it comes to group life. At best auto-enrolment will probably mean the market stays static. We will gain with the big companies but we might lose slightly with the smaller ones.”
But Walker added that group life was here to stay. He said it was a cheap and easy benefit to provide and in terms of product development, insurers were increasingly innovating by offering things around the core such as bereavement counselling services.
Another thing to look out for, Walker added, was the correlation between pay rises and increase in premiums.
“With some of the smaller companies, one of the ways the market grows is when pay increases. The bigger the amounts insured, the bigger the premiums. This means that employers with group life schemes may be less inclined to give pay rises if they have to find pensions contributions as well,” he explained.
Other trends
Some have also spotted other potential trends in group life, quite aside of auto-enrolment. Group risk specialist adviser Mark Beach of Creative Benefits, reported companies with 50 employees and less were noticeably considering their benefits packages, but questioned whether auto-enrolment was the sole reason behind it.
He said auto-enrolment was driving the first signs of potential new business for group life and that it was a significant part of movement in the product area, but added that other forces could be at work.
He said: “Is auto-enrolment causing it? It could very well be a significant part of the picture or it could also be to do with employers feeling scared about the recession lifting and driving a more mobile labour market.
“Employers could possibly be starting to worry about the labour market freeing up and want to offer something more attractive to their employees. If employees were with a firm that offered group life as opposed to no benefits it might make them reconsider looking around.”
According to Beach, the firm is getting more enquiries through from companies now about low-earning employees and using group life for retention purposes.
He explained that group life as a benefit had power on its own to keep employees interested without additional benefits, provided it was a new benefit introduction to a company that had no benefits in place already.
“Group life appeals as a low-cost option and it gives companies a lot for the price it is. This is especially the case for sub 50 companies where the cost is usually low in cash terms,” Beach said.
“After the group life base has been established perhaps then it will broaden out to look at fuller benefits packages with other cover included such as cash plans and group IP.”
There will undoubtedly be some employers where auto-enrolment cost works against implementing group life and other benefits.
But for those that see value in group life as the workplace landscape shifts, group life looks set to become a cost-effective starting point on the road to fuller benefits packages overall.
