Swiss Re report shows UK group risk market growth despite cost-of-living crisis

The UK group risk market saw in-force market premiums in 2022 exceed £3bn for the first-time, increasing 8% to £3.1bn year-on-year, according to Swiss Re’s latest Group Watch report.

The report revealed that the number of total in-force group risk policies rose by 3.6% to 87,376 (up from 84,369 in 2021), and the number of people insured hit 14,421,387 by the end of 2022 – 2.2% higher than the previous year.

Keith Williams, head group risk UKI at Swiss Re and one of the authors of Group Watch 2023, said: “In a year of prolonged political and economic uncertainty, when high inflation plagued consumers and businesses alike, it’s great to see that interest in ‘added value’ benefits remained high across the board.”

He added: “The results for long-term disability income were particularly encouraging, equating to an additional 150,197 individuals insured at a time when the government is looking to help more workers stay in – and return to – the workplace. What’s more, the fact that over 90% of in-force long-term disability income policies cover fewer than 250 employees demonstrates that the market does not just serve larger employers.”

The report revealed that the number of in-force long-term disability income policies increased by 4.2% and the number of people insured rose to 3,053,808 – up 5.2% compared to 2021. The in-force benefits and premiums amounts for such policies rose by 3.9% and 8.6% respectively.

The number of in-force death benefit policies increased by 2.7%, with lump-sum death benefits and premiums coming in 8.8% and 9.1% higher respectively. There was a 5.5% increase in the membership of excepted group life policies and a 0.7% increase in the membership of registered group life policies.

The report also showed that the number of in-force critical illness cover policies increased by 11.6%, with in-force benefits and premiums amounts rising 9.7% and 11.6% respectively.

Of all in-force group risk policies, 71.2% provide death benefits, 22.3% provided long-term disability income, and 6.5% provided critical illness cover.

Ron Wheatcroft, co-author of the report and technical manager, L&H UKI, at Swiss Re, said the recent move to amend OpRA rules, such that employees topping up their employer long-term disability income benefit through salary sacrifice will be taxed on both the contribution and the benefit, could impact future take-up.

“It doesn’t seem fair that people should have both contributions and benefits taxed when using salary sacrifice, and this could lead to a decline in future take-up of cover through workplace arrangements,” he said. “With cost-of-living concerns only emphasising the importance and value of group risk benefits, a clear theme in this year’s report is the need for stronger recognition of what the market does and its impact on society.”

He continued: “Our industry’s efforts, coupled with the government’s support in ensuring these products and services are as accessible and value-adding as possible, should therefore be considered a key priority for the coming year.”

But Wheatcroft added that changes to the lifetime allowance could trigger a change in business mix moving forward: “We welcomed the announcement that the lifetime allowance is to be abolished completely and believe that, over time, this will likely lead to some restructuring of the market. This is because the need to set up separate arrangements outside pensions legislation will no longer apply. The onus will be on employers and their advisers to consider how they wish to respond to this change, but indications are that those running excepted group life policies and registered group life policies in parallel may reduce these into a single arrangement.”

He added: “We do expect some employers to continue to use excepted group life policies and, against this backdrop, we strongly encourage the industry to continue pressing for an exemption from the relevant property trust regime for all pure protection policies.”