Group critical illness (CI) is emerging as one of the fastest growing employee benefits.
Small and medium enterprises (SMEs) have woken up the fact that it is more affordable than many had previously thought.
But growth in demand for this product remains from a low base and while claims are infrequent, costs of these claims are high which could be stifling insurer product innovation in this area.
Consequently, the focus is on providing staff with private screening and wellbeing benefits to prevent, or at least reduce, workplace critical illnesses from occurring in the first place.
This all means that the role of advisers in selling this benefit remains as critical as ever.
And encouragingly, the product has seen a new entrant from Zurich in the last month.
Among fastest growing benefits
“Critical illness cover is one of the fastest growing employee benefits,” Errol Antao, risk benefits lead, health and benefits at WTW, tells Health & Protection.
“This has been mainly driven by growing awareness around cancer and cardiovascular disease prevalence, following delays in diagnosis, due to strains on the NHS.
“Even though this is leading to a greater incidence of claims, current insurance providers are still looking to enhance their critical illness propositions and new providers are looking to enter this growing market.”
Smaller businesses waking up on cost
And according to David Williams, head of group risk at Towergate Health & Protection, smaller businesses are starting to realise that group critical illness is more affordable than previously thought.
“They realise that there’s no need to provide overly high benefit levels because, as a tax-free benefit at point of claim, it’s possible to insure a lower benefit amount which still provides the financial support needed,” Williams explains.
“But it will keep the premium low and everyone can still benefit from the additional services,” he continues.
“Related to this, critical illness has always been a very popular benefit to include in flexible or voluntary benefit programmes.
“We’re currently seeing benefits technology and platform access becoming more affordable and accessible for smaller businesses through organisations such as Benefiz, so the opportunity to introduce critical illness alongside other voluntary benefits opens up.”
Of course critical illnesses cannot be picked up if they are not diagnosed limiting the ability to find out whether an employee has cancer or is more at risk of a heart attack.
This is not helped by industrial action from NHS GPs restricting the number of patients they see daily or latest NHS figures revealing a further 18,600 patients being added to the 7.6m already waiting for treatment.
Essential financial safety net
Natalie Jenkinson, head of digital marketing at Drewberry, tells Health & Protection as employees and employers seek quicker access to care, group CI cover provides an “essential financial safety net,” helping to bridge gaps in the public healthcare system, especially when critical illnesses threaten income stability.
“Our recent benefits benchmarking survey highlights that more employers are responding to this need by opting for higher levels of cover, reflecting a trend towards stronger financial protection,” Jenkinson adds.
Longer wait times for NHS treatment are also affecting the use of the insurance, as more claims are being made through policies due to delays in diagnoses of medical conditions, Antao says.
“This is encouraging employers to consider introducing private screening arrangements to circumvent the current pressures on the public sector,” he adds.
Lower levels of cover opted for initially
But of course employers are not immune to the impact of the cost of living crisis.
Mike Hesch, head of UK employee benefits at Engage Health, explains his clients are tending towards lower levels of cover opted for initially.
“We always recommend enhanced cover to encompass a broader range of illness, usually around 40, instead of the standard 12, as the increase in cost is minimal,” Hesch says.
“There has been increased interest over the last few years as benefits demands by employees have increased. The war for talent in certain industries, especially tech, has meant employers are looking for additional benefits to add to their programme.
“Help and support for employers to communicate their critical illness offering would really help employers and employees to understand what is covered and how to claim if the need arises.”
Providing daily value
But demonstrating the value of this product to employers is also complicated by the infrequency of claim, according to Katharine Moxham, spokesperson for group risk industry body Group Risk Development (Grid).
“Providers are keen to give daily value as claims aren’t made every day, or sometimes at all for SMEs,” Moxham explains.
“Additionally, the embedded support services included in the product are such that they help employers mitigate absence and can provide access to preventative services for employees which help drive better health behaviours and outcomes, thus supporting employers with their health and wellbeing programmes.”
Role of advisers
So there is also a key role for advisers to play in selling the value of group CI.
Rus Waygood, sales manager for protection at Canada Life, points out that it is important for the industry to work with the distributor and broker communities to ensure that the product is understood and the benefits are communicated clearly, including the potential value and return on investment that the core product provides.
This is not least due to the fact that Swiss Re data shows growth in the group CI segment of the group protection industry outstripped group life and group income protection in 2023, with the concentration of new business in SMEs by number of schemes, and larger employers with 500 employees or more from a premium perspective.
“In general, there is an increased appetite for health-related workplace protection products such as group critical illness and income protection from employers and employees alike,” Waygood says.
“This has primarily stemmed from changes in morbidity and mortality, which have positively impacted the perceived value of group critical illness products.
“For example – there are increased cancer incidences across all age groups, particularly within working age adults, but survival rates have also increased.
“Historically, group life insurance was the bread-and-butter group product, providing a windfall benefit in the event of a death in service.
“Group critical illness is now gaining traction as a vital tax-free short term cash solution in the more likely event of a serious illness being diagnosed within the average employee’s working lifetime.”
Growth from a low base
Though Chris Morgan, former head of distribution at AIG Life and now an independent strategy consultant, points out that while the group CI market does show growth each year, this is from a low base.
“Most cover is provided on a flex or voluntary basis and therefore bought by employees themselves,” Morgan explains.
“Group CI is often seen by employers as a nice to have, group life and group IP are typically a higher priority. But, paying a cash benefit in the event of a serious, critical condition is a widely understood concept among consumers and this is why CI is a major product line in retail protection.
“There is an underlying need here, which could easily be filled more effectively by group CI.”
Morgan adds to grow the market further, more radical change is needed.
“Products need to be simpler and better promoted, policy documents shorter and exclusions removed,” he says.
“The pre-existing condition exclusion is a flawed concept and should be replaced by a digital customer journey where employees answer questions about their health, and get a decision, at the point of selection.
“That would require investment in provider technology and collaboration with benefit platforms, but is very achievable. I would also like to see insurers invest in marketing their products to employees, most activity is very passive at best and that has always felt like a missed opportunity.”
Limited product development expected
But Mark Waters, head of professional excellence, health and benefits at Howden, also draws a link between claims activity and product innovation.
“The industry body Grid reported earlier in 2024 that the amount paid out in benefits by the group critical illness industry in 2023 was £160.3m, an increase of £31.8m compared to 2022,” Waters explains.
“While the trend could be an indication of a return to pre-Covid levels, it’s difficult to not see any correlation between claims activity having increased so significantly, premium rates hardening and insurers showing little appetite to make material product developments.”
And Waters adds that unless there is a notable reduction in claims activity, he expects limited product changes in the short term.
“However, if there are changes in the industry, such as a new insurer entering the group critical illness market, it could serve as a catalyst for further product development and innovation among existing offerings,” he says.
Core market
The number of protection insurance providers has certainly reduced in number with Aviva wrapping up its acquisition of AIG Life this Spring.
But this benefit remains a significant market for Aviva.
Jason Ellis, group protection sales director at Aviva, maintains wellbeing services are being added to product offerings to ensure a more healthy workforce and the challenge for group CI may not be product innovation as such.
Ellis says: “Group critical illness is a core market for Aviva, as we seek to grow protection levels among families and individuals through the workplace.
“To help this growth we enhanced our proposition last year, increasing child benefits, adding new child specific conditions and offering continued cover following a claim.
“We are also seeing more and more wellbeing services offered with group critical illness policies across the market, making the product even more attractive to employees as well as employers, who want to encourage a healthy workforce. This without question makes the product even more desirable.
“With a product that is already fit for purpose and provides valuable protection, the challenge is not so much around continued product development, which is important, but more around the promotion and visibility that the product exists. Insurers, and the adviser community, both have their part to play in doing this.”
Market is growing rapidly
Ultimately, group CI has an important role to play against continued delays in diagnoses of critical conditions and ongoing labour market inactivity due to illness.
And this is a market that continues to evolve rapidly, according to Jenkinson, with a clear shift towards greater flexibility and a stronger emphasis on mental health as cost of living pressures persist.
“Providers are expanding coverage to include early-stage conditions and offering more personalised options, reflecting a broader trend towards holistic health benefits,” Jenkinson says.
“This is being driven by growing employee expectations for comprehensive protection that goes beyond traditional coverage.”