Employers want to keep group risk premiums low; there are various ways to achieve cost savings.
Group risk is an umbrella term that covers three company-sponsored employee benefits: group life insurance, group income protection and critical illness cover. Group risk benefits are often (but not always) fully insured. Provided in isolation or as part of a wider benefits package, these employer-sponsored products can give employees access to valuable insured protection cover under one 'group' policy.
Group life assurance is the most common employer-sponsored benefit in the UK. It often represents the sole life insurance provision for low to middle income individuals. Group income protection provides a continuing income for employees if illness or injury prevents them from working for a prolonged period of time. Group critical illness cover pays a tax-free lump sum to an employee on the diagnosis of one of a defined list of serious conditions, or on undergoing one of a defined list of surgical procedures.
These benefits are highly valued as they provide financial protection for employees and their families, yet they are relatively inexpensive for employers compared with some other components of the typical benefits package.
Although inexpensive compared to funding a pension scheme or sponsoring private medical insurance, many employers are keen to keep premiums as low as possible and in the current climate have considered adopting practices to cut costs. So how do they go about doing this?
It is, of course, easy to achieve savings by cutting back the level of benefits.
- Reduce the amount of cover, e.g. the multiple of salary insured for life assurance.
- Increase the deferred period of income protection schemes.
- Limit the claim period.
- Introduce lump sum settlement agreements.
- Reduce escalating claims payments.
However, cutting benefits is never a palatable option and does require careful communication to employees. Pursuing options that do not impact on benefits should be considered first. The group risk market remains a competitive market; although there are less than ten insurers offering such products, their appetite for securing premium income is great.
Rebroking schemes is an obvious start but this should not be limited to the renewal date. Mid-term rebroking often reveals the most competitive premiums, so use your advisers' knowledge of the market to source deals and opportunities whenever they present themselves.
Consider the following options.
- Combine schemes to benefit from economies of scale.
- Use one insurer for all benefits.
- Access affinity schemes.
- Take advantage of insurer discounts.
- Adopt common renewal dates for all schemes to allow insurers to quote on all schemes at the same time.
As another option, moving group risk benefits onto a flexible benefits platform can lead to immediate cost savings. Ever increasingly group risk schemes are being administered on such platforms and insurers recognise the efficiencies that this brings them. As such, insurers are offering very competitive premium rates in order to win market share.
Ultimately, commercially driven savings are there to be secured and can be huge. Make your adviser work for you – it's a competitive market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.