Canada Life's Paul Avis discusses the potential for growth in the group risk market with Fiona Murphy.
Paul Avis is a well-known spokesperson for the group risk industry, having worked for Canada Life since 2009, where he has been actively engaged in raising the profile of the market through his role as the insurer's marketing director.
His sentiment is that while the group risk industry is growing, one of the biggest problems is that growth is basically confined to a vacuum of employers already aware of the product.
Swiss Re's Group Watch 2014 showed that the UK group risk market grew by 2.8% to nearly 11 million people at the end of 2013.The group death benefits sector saw an increase to £1.1bn for the year, comparable to 9.8% growth in 2012. Excepted group life premiums grew by 17.4%.
The numbers of people insured through group IP also reached two million for the first time: a 3.8% increase compared to the previous year. Meanwhile, group critical illness cover (CGI) experienced growth of 12.8% in the number of people insured, with premium growth of 12.7%.
Avis says this growth is good and, on the face of it, group risk looks to be a robust and vibrant market.
However, he adds: "If you look at this market, your gut reaction would be that group risk is a vibrant marketplace. But there are about 1.4 million limited companies in UK, so we have only 3% buying group life, 1.25% buying group IP and 0.2% buying GCI."
Key quirks
While increasing premiums and the number of lives covered among the companies that do have these benefits in place are to be welcomed, the proportion of employers buying this benefit is "woefully underpenetrated", Avis points out.
Another key quirk of the group risk industry is that it really has only two dominant players: Canada Life and Unum, which have been wrestling for top position.
For the first time during 2014, Canada Life became the market leader in the group risk industry in three key areas and, as such, the insurer has the responsibility to change things.
Avis explains: "We are now the market leader in premiums, whereas before we were just the market leader in employees and employers covered. We are thinking about the state of this market. If you're market leader by all three indices, you first question is: is there anything more you can do for the adviser channel?"
But is this a healthy market, considering the dominance of two giants. Does this omit the potential for real competition and innovation?
Avis believes this is not the case: "We've seen new entrants come in and they struggle to gain traction in this market. We work with two pooling partners and they tell us the UK market is one of the most competitive in the world. For a new entrant coming in, they can forget about profit. The best they can do is hope to pay their expenses, because economies of scale dictate success in this market."
"We believe market growth should not necessarily come from new insurers coming to the market. It should come through partnerships with advisers taking advantage of the opportunities that are about to hit us. More insurers or competition would just drive prices down leading to less investment.
"Things like the Fit For Work service and pensions auto-enrolment will drive market growth and innovation. I don't want to be distracted on a price war when I'm doing something good for the marketplace."
Significant opportunity
All eyes are certainly on the workplace and the provision of company benefits to employees. The government's Fit for Work Service - a government led occupational health service to facilitate employees off sick to return or stay in work after an illness - is currently in its infancy.
In January, it was revealed that a team of 20 GPs in Sheffield are the first in the country to be able to refer patients to the Fit for Work service with further rollout of the scheme across the country throughout 2015.
In addition, the introduction of auto-enrolment is an obvious tipping point for greater employer engagement with their staff. As more employers reach their staging date to begin pension provision for all eligible employees, there is a clear opportunity for advisers and group risk experts to capitalise on.
Avis says: "There has to be a significant opportunity to sell group life to these new to benefit employers. Some employers will just want to do the minimum but already we've had really positive feedback from employers and advisers - a certain proportion will engage with benefits properly for the first time.
"Our challenge is to support advisers in finding those employers and making it easy for them to do group life and make sure there's adequate remuneration and that the employer understands what a simple benefit this is."
He says one way for advisers to discuss this with clients is: "During that auto-enrolment discussion, you can say to an employer ‘For 1.2% of salary you can implement a death benefit which assumes everyone is healthy with no medical underwriting, it allowable against corporation tax, benefits paid free of tax, if you can discuss cost, simplicity, reward for the adviser and minimum admin'. This would fuel market growth in group life."
Ambition
What about the Fit for Work Service - will employers think they've done their duties on employee health when the Fit for Work service is launched? Or will they use it as a springboard to do more for their employees' health and their organisation's approach to absence?
The jury is still out on this one, it is still early days. However, many group risk experts point that insurers offer far more comprehensive rehabilitation services and support than what is being piloted under Fit for Work.
Avis is concerned there should be a "greater level of ambition" for government led health incentives, particularly given the issues with welfare reform and pressures on government funding in welfare benefits.
He says: "It is generally acknowledged that every aspect of state disability benefit provision is in disarray. That includes the introduction of Universal Credit, the Employment and Support Allowance and work-related activity component assessments, the replacement of Disability Allowance with Personal Independence Payments and the Fit for Work Service."
He adds: "The government coming in May following the General Election has a large job to unravel this. The Fit for Work [project] started in 2009 with the Frost Black review. It's frankly ridiculous that it's taken six years to be launched. And it doesn't pay the £500 [a year per employee on medical treatments] it simply allows you tax concession in order to implement it.
"If this is the speed of innovation and level of ambition for employee health management from the state which is clearly imploding in all areas of state disability provision, UK PLC is in a lot of trouble."
Avis is hopeful that the group risk industry can provide solutions to complement any government led provision. He believes a form of auto-enrolment for income protection could be the way forward. However, there is no clear industry consensus as yet, how this could work.
He concludes: "Our industry has yet to have the debate about what this would look like. Group risk providers are not aligned on this and GRID (the industry body for group risk development) is trying to align this during 2015."
