Flexible benefits are the larger share of the UK GCI market, so while there was a reduction overall it was not as dramatic as it appears.
Flexible benefits continue to show great promise and the market is growing well – yet it is another double-edged sword for insurers. Employee choice should be embraced as it is certainly in the interests of the people our products are ultimately designed to be of use to.
It does pose a few difficulties though. Flexible benefit policies are more complex to administer and, due to the voluntary nature of the benefit choices, open providers up to additional selection risks. A great deal of effort has gone into minimising anti-selection to keep pricing competitive and sustainable over the past decades.
Adapting to the sudden boom in voluntary policies is a great challenge to the industry. If insurers can demonstrate flexibility and innovation to advisers and employers, great rewards may be on the horizon.
With 7,130 schemes in existence, up from 3,652 in 2013, excepted group life has clearly been a success.
Its exponential growth saw a 25.9 per cent increase in benefits and a 24.3 per cent increase in premiums. (Excepted group life is different to registered group life as the benefits fall outside of the pensions Lifetime Allowance; it works well for high earners or those with big pension pots).
Whether this was replacing registered schemes or in addition to them is hard to assess. Conversely, death in service pensions schemes reduced from 3,652 in 2013 to 2,418, falling by 8.8 per cent between 2016 and 2017.
GIP premium growth is partially due to continuing to long-term low UK interest rates.
While employer numbers are up from 17,168 to 17,442, the fact that less than 10 per cent of the UK workforce has this benefit highlights a further frustration for insurers.
They see an increasing need for this cover as state benefit amounts reduce and the roll-out of universal credit impacts those trying to claim.
Claims and Support Services
While it is great news that almost 98 per cent of protection claims were paid in the UK last year, there are still several areas that need work to establish the true value of protection. For example, a 5.1 per cent increase in premiums between 2016 and 2017 was outmatched by an 8 per cent increase in claim payments.
Does this imply that price is ruling the purchasing decision at the expense of quality?
GIP, thanks to the extensive development of early intervention services, is undergoing a makeover. Many insurers offer day-one support, but utilisation of this service is currently still tied in people’s minds to conditions likely to result in a GIP claim.
