What the rise in life assurance claims means for employers

Employers are becoming more aware of the risks to their employees – and need to take pre-emptive action to improve their wellbeing

There has been an increase in the number of group life assurance claims since the end of the Covid-19 pandemic.

Several factors are contributing to this trend, including:

the ageing workforce
late detection of health conditions
lack of access to NHS
changes to work life balance
mental health problems.

These go hand-in-hand with an increase in awareness by employers of the risks associated with these factors, naturally leading to new group life schemes coming to market to cope with demand. This all translates into an increase in claims.

The negative side of this is the potentially increased financial burden for employers. The cost of cover is likely to increase due to claim settlements, which can hit the money available to dedicate to employee benefits. And if employers are unwilling or unable to cut their benefit offering, further costs could stem from the incumbent insurer at their next premium rate review.

While this is a challenge, it isn’t necessarily all doom and gloom. A proactive approach to supporting your workforce will help minimise financial risks but also help improve employee engagement and resilience.

The costs and implications

For larger group life assurance schemes, analysing claims data by age, cause and reason can offer a range of insights. Where trends can be identified, early intervention programmes, employee assistance programmes and wellness initiatives can be the preventative measures needed to help employees manage their health, helping prevent claims and bringing long-term premium savings for employers.

Adapting benefits

Employers may wish to look at cost-saving options and adjust their group life assurance offering by amending cover levels, such as introducing tiered cover based on roles or seniority. Pairing this with wider benefits aimed at mental health and wellbeing could lead to a more cost effective and sustainable offering.

Employers do, however, need to ensure there are no contractual issues if benefits are reduced. They may also wish to consider alternative tax and National Insurance (NI) efficient funding methods, such as offering a lower core benefit but giving employees the option to top up their cover via salary sacrifice.

Make the most of insurers

It has become common for group risk insurers to extend the range of non-contractual value-added benefits attached to group policies. These services are designed to aid both the employer and members outside of the core life assurance benefit.

Historically, the most you could expect from a group life assurance scheme was access to bereavement support and a probate helpline. But, depending on the insurer, employees can also access a wide range of support services at no extra cost. These can include:

employee assistance programmes
fitness plans and advice
nutrition plans and advice
mental health support and counselling
online health checks
medical second opinion service.

Communicating with members

Transparency and open communication is essential. Educating employees about their group risk benefits, claims processes and associated value-added benefits can reassure employees. And potential adjustments can mitigate anxieties and improve employee engagement, health, wellbeing and resilience. A regular review of cover and making sure changes are communicated in a positive manner will show employer commitment to the health and wellbeing of employees.

Conclusion

Although increasing group life assurance claims may lead to increased costs which need to be sensibly contained, it does offer the opportunity to consider and improve employee wellbeing.

By taking an employee focussed approach to providing cover, an employer is investing in its most valuable asset by helping create a healthy and engaged workforce. The key benefit will be the positive impact of reducing the number of life assurance claims and increases in the cost of cover.