Group critical illness is experiencing a positive period of steady growth. Fiona Murphy takes a closer look at the market.
There have also been questions over whether employers are blending protection products together for better employee outcomes. Take private medical insurance, where medical inflation is soaring, driving premiums upwards, mostly due to the astronomical cost of cancer treatment. Arguably, CI could be used to mitigate this and used instead to aid the treatment of employees diagnosed with cancer. Is this the case?
David Williams, director of group protection at Friends Life, said this is not happening as yet but could be a future factor: “One of the drivers in inflation for the PMI product is cancer, and that brings in big losses. I don’t think it’s happening in practice yet.
There are not too many schemes that cover all employees or have the eligibility of all employees on the PMI scheme. The theory of using CI for cancer claims to counter PMI costs sounds right but I don’t think it’s what’s driving the market at the moment. I don’t think it is being done in practice.”
Innovation
Surely when a market grows it is a result of innovation driving better outcomes and access for potential policyholders – but we have not seen real innovation in the group CI market of late. Unlike its counterpart in the individual market, which has seen policy definitions continually tinkered with, we have not seen much in the way of changes to group CI schemes over the past year.
However, there are developments being driven by the presence of flexible benefit platforms, with technology opening the market to a greater audience. Bridger explained: “The majority of contracts are all fairly representative of one another, which makes it easier for an intermediary to do a market review. Also, they adhere to the ABI’s statement of best practice on terms and conditions – for example, what a heart attack means.
“The innovation has probably come through the flex market. We’ve seen more intermediaries with their own flex platforms – typically those that have come in from the USA or those consolidating intermediaries and using each other’s systems.
“We’ve seen the number of lives covered under flex schemes go from the thousands to the hundreds – the accessibility of flex in the workplace in the SME space is even more commonplace. We’ve seen lots of innovation in opening up the market.”
Improving engagement
It’s apparent that CI in itself is being used by employers as something to improve engagement with staff. Williams said: “What I’m hearing in the market is it’s seen as a valued benefit that the employee can pay. It is not as expensive as the other benefits and is easy to implement. In this environment it’s seen as something that can improve engagement. If an individual’s contribution to a pension is reducing, this is one way of building up the value back to employees.”
But what about future levels of sustainability? Paul Avis, group risk marketing director at Canada Life, said: “I think the market will keep growing. Everyone knows someone who has had a critical illness. By the same token, there are more single people in the workforce than ever before. CI appeals to them more than a death-in-service pension or a life cover lump sum. If you look at those trends, more people will buy it.
“For any employer post-recession that wants to differentiate against their peer group, this is an excellent benefit to have. It is relatively low in value and has a high value in the employee’s mind.”
However, Avis adds: “There’s clearly still an issue around communication of the benefit. All insurers offer a range of communication suites such as interactive claims guides; we all offer employee communications and case studies.”
Avis points to a recent Financial Ombudsman ruling in which an employee had complained about Friends Life’s decision to decline her CI claim in 2012 for a malignant melanoma. The complainant had failed to disclose a previous malignant melanoma that she had removed during 2009, but argued that Friends Life had, in effect, mis-sold her the policy.
However, the Ombudsman ruled that Friends Life had provided sufficient information to the claimant and her employer, both through the employer’s intranet and key features document, which outlined policy terms and conditions and exclusions. As a result the claim was not upheld.
Avis said this case demonstrates the importance of insurers and employers communicating effectively to employees – so they are effectively covered should the claim go wrong.
While group CI is on a steady path, it’s clear more can be done across the industry around employer and employee awareness to increase the numbers of lives covered and ensure people know exactly what they are covered for.
