Every year the two most important surveys for Group Risk Insurers come out in April and June – Swiss Re. ‘Group Watch’ shows how the Group Risk market is doing and how we, as an insurer, are faring in terms of market share and ORC International’s syndicated Group Risk adviser research shows how we are performing.
And every year, when I get the Swiss Re survey, it gives me an opportunity to rant:
At the risk of becoming the grumpy old man of Group Risk, after all I am known as something of a “gobby mouthpiece” when trying to drive the market forward, I can’t agree with those who are interpreting this year’s figures as wholly positive. Are they really?
I am definitely not grumpy because of the Canada Life result – we retained #1 status by employer numbers, employees covered and, once again, by the market share premium. Now, as market leader, the growth we have seen to date needs explanation.
Premium and employee growth, with wage inflation and recruitment on the up, post-recession and austerity measures, implies all is good in the Group Risk world. So, with the positive results of auto-enrolment (AE) pension expansions continuing, why am I worried?
In my view, the only correct way to measure genuine growth is by reviewing the number of new employers purchasing our products – particularly how many new employers are buying Group Life. That is why we should be concerned.
On the face of it the Group Life market gained an additional 1,226 schemes 2013-2014(1) but 1,074 of these are new Excepted schemes, most likely additional “top-ups” to existing Registered schemes – and we would urge caution here, as these schemes often need specific taxation and legal advice. Another concern is that there are 358 less Death in Service Pension schemes and some of the lump sum growth could be coming from here – employers increasing lump sums rather than insuring pensions. So, how many employers are really insuring new lump sum benefits and how many just have multiple schemes?
If we simply look at the number of Registered lump sum schemes, there were 41,323 in 2014 (an increase of 510 employers). Given that there are 1.4m UK limited companies (2), we are penetrating just 2.95% of potential customers, which, in any industry, is woeful! Some could argue that the 1.4m companies include holding, investment and shell companies etc. that do not have employees to insure. This may be true but, even if there were 100,000 of these, our penetration level isn’t acceptable.
Group Income Protection is even worse. The 2014 figures show a further reduction of 71 schemes, leaving just 17,119 employers insuring this benefit. This means a potential market penetration of just 1.22%. Group Critical Illness, I’m pleased to say, is growing every year but from a very low base. There were 2,840 schemes offering this benefit in 2014 – growth of 185 but market penetration of only 0.20%.
- Swiss Re group Watch 2015 (2014 results)