BENEFITS
Cost of insurance benefits set to rise
Employers could face higher costs for providing life, critical illness and income insurance cover as benefits to their employees, according to research from Aon Consulting.
Aon Consulting’s annual survey of insurers and reinsurers who provide group risk benefits in the corporate market found that, almost uniformly, the underlying cost of providing lump-sum life assurance, death-in-service pensions, income protection and group critical illness to employees was cheaper in 2009 than 2008. But many underwriters predict that these cost reductions will not persist during the coming 12 months.
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Paul White, head of risk benefits consulting at Aon Consulting, said: “Companies should make sure they take advantage of the cheaper costs whilst they persist. For the future, the picture might not be rosy; however, companies should not jump straight to cutting their benefits programme. Companies should be working with their advisors to build and evidence a culture of managing risks and taking action to control claim costs, from wellness strategies to active absence management programmes.”
Key findings
The survey, which covered a combined group risk market worth £1.5 billion of premium found that:
Half of insurers and reinsurers believe they will have to increase the cost of income protection insurance.
In a major turnaround from last year, when half of insurers predicted the premiums for lump-sum life assurance to decrease, 50% now expect rates to remain steady, while 38% expect rates to increase.
Not one insurer expects the cost of critical illness cover to decrease, while 29% expect to see rises.
Employers can expect costs to remain steady or increase for death-in-service pensions, with 29% of insurers and reinsurers expecting an increase and 57% expecting rates to remain on hold.
A final word
“Employers and employees have had a relatively good ride recently with the cost of some of the most basic employee perks decreasing. However, this year we are seeing more consensus amongst insurers that costs are likely to increase. Insurance underwriters and brokers have already seen employers cutting back on these type of benefits, offering cheaper alternatives, or shifting the cost to employees. This trend is likely to continue, particularly if the much speculated ‘double-dip’ recession does come to fruition, and companies potentially look at benefit reduction as a cost-saving measure.” - Paul White, head of risk benefits consulting at Aon Consulting.
Want to know more?
Title: 2010 Risk Benefits research: Insurance market at a crossroads, Aon Consulting, June 2010.
Availability: For more details about the survey visit http://insight.aon.com/?elqPURLPage=5415.
Aon Consulting is among the top global human capital consulting firms, with more than 6,300 professionals in 229 offices worldwide. "The firm works with organisations to improve business performance and shape the workplace of the future through employee benefits, talent management and rewards strategies and solutions.” For more information visit www.aon.co.uk/consulting.