Employers will often provide certain benefits, such as occupational sick pay, to employees as part of their contract of employment. Rather than bear all of this risk themselves, many employers choose to take out group risk insurance policies to cover some or all of their liability.
Here we look at some of the most important areas of the market.
Group Life
Group life assurance can be taken by an employer to provide a lump sum benefit and/or a spouse’s/dependents’ pension payable on the death of an employee whilst in service.
While some group life benefits are provided as part of an occupational pension scheme others will be provided under ‘stand-alone’ schemes without any link to a pension scheme.
According to data from GRiD and Swiss Re, approximately 48,000 schemes cover more than 8 million people in the UK for death benefits valued at £980bn, which represents around 40 per cent of all insured UK life cover, and 28 per cent of the working age population.
The group risk industry paid out 7,843 death claims in 2011, valued at £786m.
Group IP
Income protection can be arranged by an employer to cover their promise to provide sick pay to employees if illness or injury prevents them from working. It can also replace lost income if an employee has to take a part-time or lower-paid position.
If the employee cannot work due to illness or injury the policy will pay a benefit of a proportion of their salary. The benefit is paid to the employer and then passed on to the employee through the PAYE system. The benefit level is designed to ensure that the employee will be able to maintain a reasonable standard of living but still has a financial incentive to return to work.
Typically insurers will work with the employee and their employer to get them back to work as soon as it is appropriate by providing rehab services, access to physiotherapy and so on.
Just over 17,000 schemes cover 2m people for annual income protection benefits totalling £56.8bn (75 per cent of all insured UK income protection cover). However, this only represents 6.6 per cent of the working age population so the vast majority of workers do not have cover through their employer.
Just over 17,000 schemes cover 2m people for annual income protection benefits totalling £56.8bnGroup CI
