The business case for group income protection (GIP) has perhaps never been more relevant.
The aftershocks of the pandemic are still being felt with the numbers of long term sick at 26 times the levels they were in the period before Covid.
Consequently, UK plc has been faced with a productivity problem meaning companies of all sizes are exploring taking out GIP.
GIP is no longer seen as an executive perk in a world in which the wellbeing of employees is moving up the boardroom agenda.
But amid a cost of living crisis, immediate future demand could be threatened by the affordability of cover increasing the risk of scheme lapses as firms struggle to make ends meet.
Record numbers of long term sick
Health & Protection earlier this year reported on data from the Office for National Statistics (ONS) which showed more than 20,000 people had been added to the number of people who are economically inactive due to long term sickness in the UK on the previous month.
March data revealed the number of people who were economically inactive due to long term sickness in the UK had more than doubled in the past year and was at 25 times higher than before the pandemic.
Although most recent figures showed a slight dip, such an overwhelming increase is bound to have an impact on UK plc productivity and it appears employers are aware of these risks.
Reason for taking out GIP has not changed
Colin Fitzgerald, distribution director – group protection at Legal & General, told Health & Protection the insurer had seen group protection gross written premium increase by 5% to £427m, up from £405m in 2022.
But Fitzgerald added while the primary reason for taking out GIP – financial peace of mind for both the employer and employee in the event of absence due to illness or injury – had not changed, other elements of demand had.
“What has changed over recent years, is the much more proactive and integrated use of prevention and early intervention services that come with GIP to help support wellbeing – getting people back to or staying in good work as a key health goal, whether a claim is involved or not,” Fitzgerald said.
“This has elevated added value support to a core position, central to GIP.
He added that smaller organisations appeared to be embracing the need for supporting staff.
“A higher percentage of employers from organisations with 10-49 employees – in comparison to employers from larger organisations – said that for their organisation wellbeing meant a supportive and positive workplace culture and feeling valued at work, according to data from our latest Wellbeing at Work Barometer.”
SMEs introducing GIP faster than ever before
Indeed, David Williams, head of group risk at Towergate Health & Protection, reported that SMEs were introducing new GIP cover for their employees “faster than ever before”.
“It’s partly driven by the pandemic and the fear of employee absence, but also by the recent big steps forward by the GIP providers with their added value benefits,” Williams explained.
“These extra benefits are now proving to be a huge selling point for these policies: virtual GPs, mental health counselling, physio support, fitness and nutrition among other things.
“It’s all proving very popular and allows smaller businesses to introduce a ready-made benefits and wellbeing programme by simply implementing a good quality GIP policy.”
Karen Gittings, senior corporate benefits consultant at LEBC Group, told Health & Protection over the past few years she has seen increased demand for new to market income protection schemes as companies look for new ways to support employees and increase engagement.
More industries and more employees
And according to Charlie Cousins, owner of Hooray Health & Protection, this increased demand now extends across a wider range of industries.
“The demand for group income protection pre-pandemic versus now has shifted, especially when it comes to the types of industries who are reaching out to us,” Cousins told Health & Protection.
“We are now seeing a much wider range of different industries placing requests for GIP, which is something that has been very noticeable since the pandemic.
“Some of the industries we have seen increases with have been hospitality, events, care homes, and lots of charities.
“This only highlights further how businesses are expanding their benefits offerings and exploring what’s out there to protect their staff – not just the large corporations,” he added.
According to Steve Ellis, associate director at Properis, GIP is no longer an “executive perk”
“We are seeing increased demand, particularly where schemes only insured selected employee categories previously,” Ellis said.
“The benefit of early intervention services is now becoming more recognised. The benefit is becoming less seen as an executive perk.”
But while demand is soaring across industry, advisers do harbour some concerns – and for Cousins these concerns centre around pricing.
“Currently, the pricing for products is really all over the place,” Cousins complained.
“So one way our Hooray consultants are helping is by putting in requests for more variations to then expand to clients of all budgets.
“The reality of this is, it’s definitely put more work on our team with increases in admin, but it means we have a wide range of options and details on hand to provide to our clients.”
The demand for GIP looks set to continue – even amid a cost of living crisis, according to Dan Crook, protection sales director at Canada Life.
“While we recognise that the cost-of-living crisis and inflation affects employers as well as employees, and we may well see schemes lapse for recessionary reasons, we believe that group risk products, including GIP, have risen in importance and focus as a result of the pandemic,” Crook said.
Indeed, Jason Ellis, group protection sales director at Aviva, pointed out that the insurer has actually seen an increase in scheme retention.
“Alongside the high increase in new business it’s also interesting to note that retention of GIP schemes has also increased as employers look to stay with their current insurer.
“Many employers will have invested their own time and resources in sponsoring the roll-out of their chosen wellbeing solutions to employees and this is a definite factor.
“This is good news for our sector as it encourages a more consultative approach and moves the market away from spreadsheet broking where price was more important than value.”
Desire from government to work with the sector
Despite pricing concerns, the possibility of scheme lapses and a cost of living crisis, it appears that ultimately the growing importance of this cover means there is a key role for the industry to play alongside government to tackle soaring numbers of long-term sick.
“There is a clear desire by the government to support the health and wellbeing of employees”, Nick Homer, head of group risk market management at Zurich, told Health & Protection.
“We’re optimistic that as an industry we will be able to engage further and collaborate – raising awareness of the expertise we can provide to employers to keep people in work.
Katharine Moxham, spokesperson for Grid, agreed adding: “With the government’s focus firmly on getting people back into the workforce, GIP has a definite part to play.
“What else provides such a wealth of support – from a financial benefit in the event of long-term absence, to early interventions, vocational rehabilitation, and access to treatment and then services aimed at prevention and encouraging better health behaviours?”
And according to Steve Herbert, wellbeing and benefits director at Partners&, now is most certainly the time for the industry to ensure that the benefits of GIP cover are fully recognised by the political parties vying for power at the next general election.
“Ideally, we need this issue to actively appear in at least one – and preferably multiple – manifestos,” Herbert continued.
“If this can be achieved, then it is far more likely that the subject will benefit from political oxygen and action early in the next parliamentary term.”