Alan Sparks of Canada Life looks at what can be done to cross the barriers to growth that the group life market faces
The case for growth
The area where there is an opportunity for group life is the area that currently appears to be performing most poorly. The number of schemes in the market is broadly stationary. There were 48,071 policies in 2010, and this has risen to 48,568 in 2014. However, this is on the back of 1,900 new excepted policies, growing in number as the lifetime allowance has fallen. The number of registered lump sum schemes has dropped by over 250.
In June 2015 AE for pensions will reach the smaller employer. The Pensions Regulator (TPR) has planned for over 1.3m employers to go through the AE process. With fewer than 50,000 group life policies in the market today, that leaves over 1.2 million potential customers for group risk.
Employers will be approaching employee benefits afresh, possibly for the one and only time. Cynics will argue that these employers cannot afford pensions let alone anything else. There are certainly some companies like that, but the GRiD employer survey showed only 9% of small employers are not interested in benefits at all.
Explaining the product may also be a hurdle. GRiD figures show only 49.8% of employers questioned understood what group life offered. Further research carried out for Canada Life Group Insurance with HR professionals showed 18% knew little about group life and a further 32% unsure about costs and values of the product.
The biggest hurdle may be cost but it is useful to highlight perception. GRiD has shown that employers believe that group life cover will cost them 3% of salary roll to provide, whereas those in market know the costs could be under one-tenth of that. When the tax advantages are taken into account, this is a very affordable benefit.
Crossing barriers
Addressing the indirect barriers the employer faces is also important. Free cover levels are a traditional market feature but has the message reached the small employer that this means no medical forms, hassle or loadings?
What a message to an employer: Of course the insurers assume that everyone is healthy if they are there on the day the scheme starts. More recently the option of a group life master trust to save the company the hassle of dealing with HMRC registration has become widely available.
Nevertheless, you still need to find the clients. The great news is that they may come to you. The Pensions Regulator (TPR) tracks how employers are approaching AE and their figures show 60% of small employers will look for external advice and 34% of those who have sought advice went to a financial adviser.
In addition, the TPR has announced it is about to write to more than 1.5 million employers to remind them of their duties over the next few years, so some will look for advice long before their staging date.
In summary, providers can stay in their comfort zone and see premiums drift up over time with wage inflation and employee numbers depending upon recruitment, or they can seize the opportunity together to increase the number of companies that get their people protected. Canada Life is firmly in the second camp.
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