Will AE really boost group protection?

When considering the ‘glass half full or half empty’ scenario for automatic enrolment (AE) and group risk, the glass is looking most definitely half empty.

While it would be nice to be proved wrong (after all, there will probably be some market growth through new schemes to market, as well as scheme expansions to non-insured employees from the current insured schemes), there is a worry that a big opportunity in the small and micro employer segment will pass us by.

Of course, this view is not shared by all, and some genuinely believe that AE is an untapped opportunity we will maximise, but a fear is that group risk will be one step too far for many advisers and employers when coming to grips with the complexity of AE. Open goals are often missed, and we do not have a great record of tapping into these opportunities.

So, as an industry, are we going to take the opportunity that AE provides of getting us in front of an employer, to discuss the merits of group risk, especially for group income protection (GIP) where we are seeing state benefits being cut back? How far is self-provision of benefits in disability behind pensions?

Let us start with the good news. There is likely to be some growth in group risk from AE, if the marketplace expands the number of employees covered this will lead to an increase in premium levels.

The hope is that employers will extend their current schemes, preferably to cover all employees or previous non-pension members. Aligned with this are some extraordinarily and unexpectedly good AE take up rates so far, with an average 9% opt out rate from 2,256 employers that have been through the process in its first year.

Whether this will continue, with the 29,000 employers that are due to stage between January 2014-July 2014 remains to be seen and will provide a more valid sample, because the larger employers are clearly more able to focus on resourcing up and leading this charge.

Alongside this pensions change, many employers seem to be extending their Group Risk schemes, specifically life benefits, to those who were previously non-insured. Compared with 2012, when about 13% of our new group business was for scheme expansions, in 2013 this figure has increased to 25%. Up to September this year about 40% of the Canada Life pension-linked schemes have increased as a result of AE.

Employers needing help

The first challenge, however, is the volume of employers that will need help from advisers on their existing group risk schemes as the staging dates get to smaller employers.