The future for group income protection (GIP) should be bright, driven by increasing demand for employee benefits, improved add-on services and the cost-effectiveness of the product during the cost-of-living crisis.
The growing importance of add-on services attached to GIP schemes have increased the value for employees and employers, although advisers have noted it is not always as valued as it could be.
Health & Protection also found that while rising premiums for workplace benefits could hinder some take-up, this is also driving an updated relationship between protection and health benefits and prompting creative solutions.
But there could be some challenges ahead, not the least from the first Labour Budget in 14 years with the impact of tax changes potentially hindering continued growth.
Add-on services
Many GIP policies include additional benefits such as rehabilitation services, counselling, and employee assistance programmes (EAPs).
One of the defining trends of recent years, particularly since the pandemic, has been the growth in these services, with the need for many customers to manage their health without physically going to a doctor being significant.
David Williams, head of group risk at Towergate Employee Benefits says add-on services are bringing a lot of value.
“GIP has evolved in the last 20 years and the add-on services are a crucial step forward, so much so that the term add-on actually belittles their value.”
Each service on its own brings value, but put together their value is amplified.
Williams continues: “The introduction of add-on services started with simple EAPs but has now exploded into a huge range of vital prevention and early intervention tools that are instantly accessible via smartphone apps and linked face-to-face services.
“When dovetailed with the insurer’s absence management services this then becomes more valuable than each individual part in isolation.“
Mark Waters, head of professional excellence at Howden is also a big supporter of add-on services, “particularly where the service is directly relatable to the core product,“ he says.
“For example, end of life planning services that are part of a group life assurance proposition really resonate with employers and employees and help avoid complications and delays at the point of a claim.”
Virtual GPs
Historically these services have not been as widely used as they should have been, but that is starting to change, although not everywhere.
As Rus Waygood, sales manager for protection at Canada Life says: “A few years ago, you might have seen an employee assistance programme (EAP) phone line or a second medical opinion service with about a 1% utilisation rate.
“Now, fee support and value-added services are a significant part of the proposition, especially virtual GP services.
“From our perspective, virtual GP accounts for around half of all support service cases.“
And over at Unum it is a similar story.
Clare Lusted, head of product proposition at Unum says: “Value-added services are certainly becoming a more prominent part of insurers’ offerings, becoming more comprehensive for employees and their family members.”
But not everyone is impressed by virtual GPs.
Charlie Cousins, founding director at Hooray Health & Protection says: “Early Intervention and rehabilitation services are of course extremely helpful but for our SME client base we find the virtual GPs and added value services are mainly pointless. ”
He says: “A total of 99% of our clients that hold GIP also have private medical insurance (PMI) and will always use the PMI in the first instance.
“We know from insurers the usage of these services is extremely low and feel the money could be better used elsewhere.”
Hygiene factor for employers
But even if not used to a great extent, the add-on services still give significant value according to several providers.
Waygood says: “Small perks serve as a surprise and delight element, ensuring employees are continually realising scheme benefits.
“It may not be needed often, but when it is, it’s invaluable.”
James Walker, head of product and proposition at Legal & General Group Protection agrees and says: “Over the last year, add-on services have continued to evolve and grow.
“The two main ones – EAPs and virtual GPs – have almost become a hygiene factor for employers.
“The modern-day EAP extends way beyond traditional telephone counselling while virtual GPs are also used and valued by employees.“
And benefits are not solely for the customer as employers also gain.
Lusted says: “Our research shows 80% of employees say they are more productive at work when they are feeling healthy and happy, meaning engaging with more value-added services can see significant benefits for employers.“
Jason Ellis, group protection sales director at Aviva points out: “Not only do services like these help employees take control of their health, but they also help employers control sickness absence by identifying health risks early and signposting the employee to appropriate support.
“The key is making services easily accessible – employers don’t want the burden of additional administration, they need support with employee engagement.”
GIP or PMI?
Other employee benefits such as PMI are also seeing significant growth, indicating the desire of employers to support their workforces.
For Towergate’s Williams, one of the biggest upcoming trends is prevention.
He says: “GIP insurers are now very adept at supporting absent employees at early stages of their absence, so the untapped area is the preventative stage.”
And Waters adds: “With the change to Employers National Insurance going ahead, employers seeking cost savings will likely be inevitable.
“The broad range of added value services that form part of group protection propositions could enable employers to remove similar or the same services they are currently paying for, increasing utilisation of the added value services.
“The future sustainability of GIP lies in both preventative measures, such as incentivising healthy lifestyles, and in early notification of potential claims, enabling effective intervention and rehabilitation.”
Growth in GIP could also be supported by the absence of tax measures that can restrict the desirability of PMI.
This is the opinion of Legal & General’s Walker who says: “On trends, the fact that employer-funded GIP can be rolled-out without any benefit-in-kind implications is a big plus, especially during the cost-of-living crisis.
“In contrast, the PMI market is facing challenges, as employees struggling financially might be less willing to pay the benefit-in-kind associated with it.
“GIP doesn’t face such issues, and employees can access all the add-on services, such as physiotherapy, without any excess to pay.“
But for Cousins, the outlook is less promising.
“We are sadly still seeing the trend of significantly increasing prices. For new to market schemes we are still seeing GIP as our lowest converting product with price listed as the key lost reason.“
And the potential for GIP to grow at the expense of PMI is not a strong consideration for Katharine Moxham, spokesperson for trade body Group Risk Development (Grid) who believes it is a more complex situation.
“While the GIP market saw some pleasing growth in 2023, I don’t think this is necessarily at the expense of PMI products,” she says.
“What employers are doing is examining both with greater scrutiny and in both directions.“
Mitigating PMI costs
Instead, Moxham suggests this two-way consideration is prompting a different relationship between the products.
“Anecdotally, I’ve heard of employers looking to mitigate PMI claims and premium increases by making better use of the embedded services that come with their GIP policy,“ she says.
“But I’ve also heard of employers restructuring their GIP arrangement to release savings to fund their PMI premium increases too.
“Clearly, it’s vital to breakdown the silos and ensure employers get best value by dovetailing the services provided by each product and developing protocols for where to send employees for what conditions.”
And Unum’s Lusted is in agreement.
Lusted notes that according to Swiss Re Group Watch, GIP enjoyed growth between 2022 and 2023. The product saw 3.2% growth in the number of policies; a 6.6% rise in the number of people insured; and a 12.5% increase in annual benefits.
But she says despite GIP’s strong growth, there’s no anecdotal evidence suggesting this is at the expense of PMI.
“GIP and PMI each address different aspects of employee health and wellbeing, so shouldn’t be an either-or choice for employers,“ Lusted continues.
“Looking holistically at their benefits strategy, employers and their advisers might consider both GIP and PMI, plus options like dental plans, health cash plans or critical illness cover as appropriate for the needs of their workforce and their budget.”
Managing premium rises
One factor for concern in the market could be premium inflation, particularly as costs for other benefits rise.
And with wages catching up to household inflation increases this impact grows, but there are mitigating factors employers can use to temper these effects.
Canada Life’s Waygood explains: “As salaries increase, so do premiums, which may present a juggling act for some employers managing health and protection benefit lines – given medical inflation and claims incidence driving costs in PMI and dental care.
“We expect to continue to see good levels of new business, particularly SME, through to the end of the year.
“And while large companies have traditionally offered income protection until the age of 65, many small businesses and start-ups now choose limited pay options of two, three or five years, helping to manage costs effectively while still providing valuable support to employees.”
Whole of workforce future
The general view appears to be that the future of GIP is a positive one, with continued growth and development of the product.
Ellis continues: “We expect to see a continued uplift in expansion business as existing clients look to extend cover to the whole of workforce.
“Employers are looking to do this in a cost-effective way and we’re seeing an increased demand for lower cost options such as group income protection limited payment terms.
“The group protection industry wellbeing trends will continue to evolve towards more inclusive, fair, and accessible benefits.
“Employers will continue to actively work to address benefit gaps for lower grades, reduce waiting periods for joining benefits, provide increased benefit choice, flexibility, and personalisation, and extend benefit availability to employees’ dependents.“
But where does the future of GIP lie?
The Budget increase in National Insurance Contributions could see firms reduce or cut staff benefits like group risk all together as they seek to reclaim costs from other areas.
And where employers currently include cover for employer NI expenses within their scheme they can expect some direct increases in premium rates.
So while the overarching environment is generally positive, it will take some time to see how employers react to the impending changes in April.
