It seems natural to have a sense of foreboding about how the group risk claims story might pan out in the wake of the Covid-19 pandemic.
We still have little idea exactly what toll Long Covid is going to take on income protection books, and a rush of belated lockdown-related mental health claims cannot be ruled out.
The suspension of routine screenings during lockdown and the reluctance of many people to attend medical appointments due to Covid-19 could also now create a tsunami of critical illness claims. More conditions could start to get diagnosed and, because they may have become more serious during treatment delays, they may be more likely to satisfy policy payout conditions.
The claims story
Group life claims have certainly rocketed. Recent Group Risk Development (Grid) research found that insurers paid out £168m in Covid-related death benefits during 2021 – 80 per cent more than during 2020.
There have also been death claims less directly connected to Covid, which are harder to quantify.
Dave Parker, head of scheme underwriting at Canada Life, says: “An increase in non-Covid mortality observed on our portfolio in the second half of 2021 may be an indirect result of the pandemic
due to pressures on health services and their ability to provide critical care. But it may also just be short term volatility.”
Overall, however, the group life proposition has clearly done largely what it has claimed to do on the tin.
Steve Ellis, head of employee benefit consulting at Prosperis, says: “Death in service claims have been paid promptly, and ancillary counselling services for surviving families and colleagues have been well used and well received by HR teams, who want to be seen to be promoting a strong wellbeing angle when something traumatic has happened in the workplace. It can all be considered quite a good advert for group risk.”
The extent to which this good advert has extended to group income protection and group critical illness is less clear.
No industrywide statistics for them will be produced by Grid until May 2022 at the earliest, and its figures for 2020 unveiled no great story – with critical illness claims decreasing slightly and income protection claims increasing slightly.
Feedback from individual insurers suggests that this next survey is unlikely to throw up anything startling. For example, Generali UK Employee Benefits hasn’t detected any specific trends caused by delays in diagnosis, and Legal & General hasn’t seen any significant excess claims emerge within its group income protection or critical illness portfolios.
Aviva does report an annual increase in group income protection referrals of 39 per cent in 2021 but, in view of the well-documented rehabilitation facilities that insurers provide nowadays, this may not have resulted in significant increases in actual claims – for which it provides no figures. Indeed, Aviva’s Covid-19 rehabilitation pathway has seen 88 per cent of Long Covid referrals return to work during the deferred period.
Nick Homer, head of market management, corporate risk at Zurich, also considers Long Covid to have been more a story of effective rehabilitation support than of claims.
He says: “I haven’t seen the data and it’s early doors, because many deferred periods are for six months, but I can’t recall any Long Covid claims. We haven’t had a big issue with Long Covid so far but there continues to be uncertainty in relation to it.”
Pricing
Insurer reluctance to provide company-specific data is even more pronounced with regard to pricing because of Competition Act concerns.
And, even if there was greater transparency, it would still be unclear to what extent factors other than claims had contributed to price changes and whether price increases could be attributed to a correction from an unrealistically soft market.
Canada Life, Aviva and Zurich all confirm making minor adjustments to pricing, without singling out individual products. Homer says: “I think insurers have taken the hit more than customers because life and group income protection tend to be priced on two or three-year cycles. So, any consideration of rate increases needs to be looked at in that context. And remember they involve factors other than Covid such as the yield curve.”
Most insurer spokespeople, however, sit firmly on the fence and simply highlight the importance of ongoing monitoring.
Lee Lovett, managing director, group protection at AIG Life, says: “Covid has proven to be quite unpredictable over the last two years and, although the evidence suggests we’ve seen the height of Covid-19-related deaths and that the risk will fall further over the coming months, our expectation is that it may take two to three years to see whether the pandemic has had a long-term impact on people’s health and wellbeing.”
Fortunately, hot-off-the press data from Swiss Re’s 2022 Group Watch can shed objective light on pricing (see box), revealing tangible but unspectacular premium increases over and above in-force benefit increases. It also shows that these rises have done little to dampen demand, and intermediary feedback certainly doesn’t contradict this.
John Kerr, managing director of Kerr Henderson, refers to “a bit more claims activity” and acknowledges that group risk premiums are increasing, “possibly by as much as 10 per cent”. But he stresses this is much less of an issue than on the private medical insurance (PMI) side, where a number of insurers have been trying to force through premium increases of 20 per cent.
He says: “Group risk claims are up a bit and premiums are up a bit, but there’s no big story. Clients are still buying, and none have wanted to trim their cover. I think the bigger story will be Ukraine and how it’s affecting inflation and the job market, because there’s massive wage pressure coming through.”
David Williams, head of group risk at Towergate Health & Protection, argues the group risk industry deserves to pat itself on the back. “It has served its purpose very well during the pandemic, and its popularity has gone up,” he says. He reports getting a lot more enquiries from smaller companies, some with less than 50 employees.
With so many question marks raised from all corners of the industry about Long Covid, not least about how long it may actually last for, back-patting may be a little premature. But, credit where credit’s due, progress to date has certainly been encouraging.
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