The group risk market will continue to face challenges for insurers and advisers alike in 2013, according to Paul Avis, marketing director of Canada Life Group.
Avis said while the soft market for group life, and death in service pensions specifically, is coming to an end, the trend for group income protection is still towards reducing premiums and the group critical illness market, though still far too small, is continuing to grow.
In the current financial climate, Avis said premiums have to take account of an aging workforce and the impact of long term low interest rates.
"Some segments are showing signs of recruitment and growth, but this is still fairly limited and the bigger focus on market and profit growth has to be achieved by taking advantage of the wider environmental factors that drive customer behaviour," commented Avis.
Avis said with the Retail Distribution Review (RDR), there will inevitably be more adviser consolidation among top end consulting and employee benefits specialists.
"Pension remuneration is likely to reduce for non-fee based advisers, whilst some smaller advisers may simply give up the industry altogether," said Avis.
He added: "The impact of welfare reform has yet to be fully felt. As the government continues and ultimately finalises its review of current claimants, leaving fewer people qualifying for state benefits, the profile and emotion surrounding, "what happens to me when I am off sick?" will increase and potentially lead to a greater demand for Group Income Protection from employees.
The Retail Distribution Review (RDR) – due to be implemented on 31 December 2012 – will change how products are sold, preventing insurers from paying commission to intermediaries on retail investment products.
This clampdown on commission matters because historically, Standard & Poor’s (S&P) says most UK-based independent financial advisors (IFAs) have used a commission-based business model for financial advice.