Group risk premiums return to growth in 2011

Positive news for first time in two years

In-force group risk premiums returned to positive growth in 2011, following two years of decline, Swiss Re’s annual Group Watch report reveals.

Premiums rose by 2.9% last year, compared to falls of 1.8% in 2010 and 7.7% in 2009.

All three main product areas surveyed saw growth in 2011, with critical illness premiums up 9.4%, premiums for death benefits up 4.1% and long-term disability up 0.1%.

Ron Wheatcroft, technical manager at Swiss Re and author of the report, said: "It is good to see market growth again after two very difficult years of continuing financial pressures on businesses.

"However, the group risk market continues to be tough with pressures on employers to control or reduce their costs."

The report highlights a shift towards ‘flex’ and voluntary cover, which now accounts for 10% of total in-force premiums. Furthermore, premiums for long-term disability income ‘flex’ benefits increased by 42.3% over the year.

Wheatcroft said: "The growth of 'flex' and voluntary cover may be an indicator of a gradual change in the role of the employer from benefit provider to facilitator as businesses seek ways of sharing costs and providing greater employee choice."

In addition, the report points to auto-enrolment into qualifying pension schemes as a significant potential challenge for larger employers this year and next.

Russell Higginbotham, UK chief executive officer of Swiss Re, said: "With auto-enrolment we may see some existing risk schemes grow as employees who are not currently pension scheme members are enrolled. This will have varying effects on scheme costs depending on the additional take up of pension provision.

"It is imperative that we make the implementation of this change as simple as possible for employers and employees alike."

The report found that group life schemes currently provide 40% of all insured death benefits in-force in the UK, while group long-term disability income schemes have increased their share from 70% to 75% of all insured cover since 2002.

Higginbotham added: "As the welfare state withdraws from universal provision, the importance of the ongoing role of the private sector in protection cannot be over-estimated."

Katharine Moxham, spokesperson for trade body GRiD, said the results are encouraging and point to a continued recovery in the group risk market.

She said: “All overall in-force group risk premiums are up on 2010, especially group critical illness. In force benefits have grown across all product lines indicating that employers and employees still highly value these benefits.

“It is also encouraging to see survey respondents' growing confidence and the view that auto-enrolment could be a catalyst for further growth. It is also clear that employers continue to play an important role in the move away from state provision to greater self-responsibility.”

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