Paul Avis challenges the orthodoxy that automatic enrolment will also boost group protection sales.
If Canada Life’s view that 40%-50% of the market’s 68 thousand group risk schemes are pension-linked is correct, about 27-34 thousand schemes will need consultancy support to discuss possible scheme expansion.
Be in no doubt, we all have a massive task ahead of us to service the existing client-bank’s needs. To illustrate the volumes involved, internal analysis shows that 52% of our group life schemes in the sub-250 employee sector are pension-scheme linked.
As Canada Life provides cover for the most employers (by scheme volume), we are preparing to deal with many thousands of scheme quotes and policy re-writes due to new eligibility definitions.
We do not want our service to diminish in any way, but the volume of employers that need to be supported from February 2014 (when the sub-250 employee segment is included in AE) is something that advisers need to consider and prepare to resource.
As a farming, rather than hunting, opportunity there is a greater likelihood that, with the right adviser support, the market will grow. But will this growth also be matched by employers purchasing ‘new-to-market’ group risk schemes?
Premiums and employees covered are not the only benchmark of AE success: it is the volume of new employers adopting our benefits we should be judged by too. However, this metric has not been used as a sign of a healthy group risk market.
In simple terms, in 2012 the market did not grow significantly by employer numbers: it was a measly 0.56%. In both 2012 and 2010, group life schemes were in place for about 48,000 employers, so the market has remained static.
GIP schemes covered about 17,000 employers in 2012 compared to about 20,000 thousand employers in 2004, so this area of the market has been continually decreasing.
Group critical illness has bucked the trend and ridden the increasing popularity of flex. While in 2005 there were 1,800 schemes it has grown to 2,500 schemes in 2012: a small change, but growth nonetheless.
Overall, the market grew between 2011-2012 by just 380 schemes, many being new to market group critical illness schemes, the smallest of the three group marketplaces.
Taking this as our starting point, we clearly face a challenge to get as many as possible of the 1.35 million employers that must undertake AE by 2018 engaged with us to significantly expand our market. But who will do this and how? Will the current group risk industry be too focused on consulting with the existing market/pension-linked schemes?
Certainly, the insurers that have both pensions and Group Risk, and deal direct, can proactively quote when undertaking AE pensions work. With the market already facing pension’s resource issues, expansion is not guaranteed. The market anecdote is that for companies with fewer than 30 employees, providers will not quote for pensions work.
For staging dates starting in January 2016 it is possible that we will see the NEST pension really take off, rather than those supplied by pension providers. A further issue is the pensions resource available in the intermediated advice market.
It is believed that from April 2015, the sub-50 employee market will be looking more into online support, because of a lack of readily available professional advisers who are already inundated with AE implementations.
Bearing in mind these figures relate purely to pensions advice, the possible ‘withdrawal’ of both pension providers and advisers from the market between April 2015 and January 2016, due to over-demand does not bode well for the group risk market, which is highly intermediary oriented.
