In-force group risk premiums in the UK rose by 9.7% in 2012, confirming the turn around in the market seen in 2011. There were some increases in rates, but also in the overall numbers of lives and schemes covered. The effects of the the introduction of auto-enrolment are still to have an impact on the market. The total cover provided by employer sponsored death benefits arrangements topped £1 billion in 2012 – a milestone for the industry.
Swiss Re’s Group Watch 2013 has shown very strong premium growth in in-force premiums for death benefits, long-term disability income and critical illness protection in the UK market. Group death benefit premiums increased by 9.8% with Excepted Group Life premiums increasing by 14.8%. Long-term disability and critical illness premiums also showed very strong growth of 8.7% each for the year.
“Growth of around 10% is extraordinary considering that the group market was in decline only two years ago,” says Russell Higginbotham, CEO Swiss Re UK. “This shows that the market is getting it right in the face of tough economic conditions and legislative changes.”
The report finds that some growth was driven by premium increases. 80% of industry respondents to Group Watch’s qualitative survey reported hardening rates in the group death benefits sector. However, improvements in the market were also supported by a positive increase in the number of lives and number of schemes in the market.
“The fact that all aspects of the market have grown despite rate increases is a pleasing result for the sector,” says Ron Wheatcroft, Swiss Re expert on the UK group life market and author of Group Watch 2013. “It is also positive to see that a large number of survey respondents are upbeat on the growth prospects for other key factors, such as the number of lives covered. The figure of £1 billion in premiums for the group death benefits sector is a milestone for the industry.”
There were few negatives in this year’s Group Watch 2013 report. The number of lives covered under widows’ and dependants’ death in service pensions fell by 3.1% with a 2.5% decrease in the number of schemes. This is largely attributable to the low interest rate environment which has resulted in the provision of lump sum cover becoming more attractive.
The report finds that further legislative changes will place a greater emphasis on high quality advice to finding the most appropriate benefit packages for employers and their workforces. For example, further reductions in Annual Allowance and Lifetime Allowance from April 2014 may increase demand for non-pension linked death benefits, accelerating a trend which is already being seen in the growth of excepted group life cover.
Key figures from Group Watch 2013 (in GBP millions)
| Product Type |
2009 |
2010 |
2011 |
2012 |
| Death benefits |
897 |
919 |
956 |
1,055 |
| Long-term disability income |
568 |
517 |
518 |
563 |
| Critical Illness |
48 |
50 |
55 |
60 |
