Group income protection (GIP) hasn't seen a rush as a result of auto-enrolment as yet, but with insurers continually innovating, it could soon be on everyone's radar. Fiona Murphy finds out how the market has performed over the past year and asks about prospects for growth.
GIP appears to be in a state of conflict at the moment. While issues such as welfare reform and product innovation to improve simplicity would suggest real potential for the product, it also is being left behind as companies focus on auto-enrolment and balancing their books amid a gloomy economic climate.
However, despite such conflicting trends, the 2013 Group Watch from Swiss Re had found total group risk premiums in the UK rose by 9.7% in 2012. There were some increases in rates, but also in the overall numbers of lives and schemes covered.
Within that, GIP showed growth of 8.7% for the year. This is impressive considering the market had faced real decline just two years ago.
Nick Homer, group protection manager, corporate propositions at Zurich agreed the market is seeing some growth.
“We saw in the three months to the end of last year not far short of a 9% increase in premium in group income protection. That was partly driven by rates hardening and going up, but I find it [GIP] to be a very resilient market,” he said.
“We’ve been through tough times, but with the number of schemes in place and lives insured we saw a slight increase. The rationale for GIP is becoming stronger in terms of benefits of the employee. We all know the continuation of sick pay is a fantastic benefit for employees, but I think it’s becoming more compelling with diminishing state support: employees will naturally look to employers and government to bridge the benefits gap.”
However, Homer added that while market numbers might not have grown to a significant extent, premiums have increased.
“Part of this is changes put in the schemes and part of this is people are getting increased salaries, so that will lead to increased premiums per scheme.
Surprisingly, a lot of GIP schemes have eligibility linked to pension schemes in the same way as many life assurance schemes do,” he said.
“With auto-enrolment starting to come through, particularly for the bigger employers, it is starting to expand membership in the bigger schemes, and this is starting to increase premiums.”
Auto-enrolment and benefits sentiment
Auto-enrolment landed last January. With many of the big corporate firms likely to have GIP schemes in place, how has this affected the market?
For many employers and intermediaries, pensions is the primary concern, but there has been an expectation that greater comfort with benefits could translate into greater interest in GIP.
Andrew Potterton, head of proposition development at Unum, said the company has been trying to embrace this opportunity while revaluating its overall benefits packages.
He said: “We’re trying to get them to bring group risk, particularly GIP in, saying perhaps you also should think about the people who won’t even get to retirement in the workplace. We think there’s a cohesive story there.”
Paul White, client director at Punter Southall Health & Protection Consulting, said: “On the one hand, there’s a camp in the market believing there will be a huge boost and lots of employers will be broadening out their risk benefits to groups of the population who didn’t have it previously. However, the number of schemes with IP linked is much smaller, so it’s probably not the boost some people would hope.
“And the obverse is, with lots of people looking to fund auto-enrolment, it’s a finite pot. Where is that money coming from?
