Record growth in 2023 for UK group risk market

The UK group risk market saw another record year of growth in 2023, with big increases in death benefits, long-term disability income (LTDI) and critical illness cover, according to Swiss Re. The reinsurer’s annual Group Watch report found that the number of in-force policies increased by 4,420, (87,376 to 91,796), while the number of people insured was 15,314,655, a 6.2% increase year on year.

The number of members covered under lump sum death benefit schemes increased by 579,083 (5.5%), taking the number of people covered to 11,083,680. Insured benefits under lump sum death benefit schemes increased by 12.9%, taking total insured benefits to £1.782bn.

The number of members covered under LTDI schemes increased by 201,377 (6.6%), taking the total number of people covered to 3,255,185. Insured benefits under LTDI schemes increased by 12.5%, taking total insured benefits to £124.9bn pa. The number of members insured in critical illness schemes increased by 164,817 (22.4%), taking the number of people covered to 901,387. Insured benefits under critical illness schemes increased by 14.2%, taking total insured benefits to £64.3bn.

The average benefit per member for LTDI increased by 5.5% and the average lump sum death benefit increased by 7.0%. The average in-force sum assured for critical illness fell by 6.7% from £76,433 to £71,316 (Swiss Re explained that this was in part due to one additional product provider sharing data where the average sum assured was lower).

Ron Wheatcroft, joint author of the report, said: “In the face of increasing costs for death and disability benefits, it’s extremely encouraging to see the value employers put on the provision of risk benefits to attract, retain and support their workforces. It was particularly pleasing to see a further 201,377 members of LTDI policies in 2023, on the basis that workplace LTDI policies not only pay a proportion of pre-disability earnings, but also bring the additional benefits to help people to remain in or return to work as and when they are able.”

He added that despite clear progress, more must be done to help employers: “This means widening the health narrative to include the important role vocational rehabilitation plays in supporting workers and ensuring the tax system treats occupational health and vocational rehabilitation services consistently.”

Wheatcroft continued: “This year we’ve seen calls from product providers and employee benefits consultants for the government to reconsider the tax treatment of contributions made by members to extend LTDI benefits provided by their employer. For the second year running, the percentage of schemes offering this facility has reduced, with the double taxation of premiums and benefits a barrier to what could otherwise be greater personal resilience.”

Excepted group life policy numbers and membership are growing much faster than registered pension arrangements. “The trend towards using excepted group life policies (EGLPs) will continue given the potential tax liability for benefits above the limit now known as the lump sum and death benefit allowance,” said Wheatcroft.

He added: “We estimate that the cost of administering and assessing the potential periodic tax liability on discretionary trusts now stands at approximately £4m each year. This tax appears to be related more to investment gains, and we hope to see this potential liability abolished on all trusts holding pure protection policies, and to simplify the administration further by abolishing the requirement for a common benefit formula to apply to all members.”

Katharine Moxham, spokesperson for Group Risk Development (GRiD), the industry body for the group risk sector, said: “It’s so pleasing to see Swiss Re reporting group risk market figures that are up by every measure. It’s excellent news that in 2023, the number of people covered by the industry increased by 893,268, making group risk benefits some of the most popular employee benefits offered by companies. The number of employees insured under group risk policies (15.3m) now exceeds half the payrolled population, which is a step-change in itself given the steady increase in employment to higher than pre-pandemic levels.”

She added: “Interestingly, the report also highlighted the topic of the language the industry uses to explain and promote group risk, with calls for this to be made clearer. It’s therefore key for communications around group risk benefits to be simplified so that people who work outside the industry can relate to the value of what they have in place, and it’s an area where the industry and employers need to work together.”