The cost to employers of providing life and critical illness insurance, and income protection insurance, in their employee benefits packages looks set to rise steadily over the next two years, according to a new survey by Aon Consulting.
The costs of life and critical illness cover have fallen over 2008/09 but only 12% of those insurers surveyed by Aon expected to be able to lower the cost of their lump sum life insurance cover this year – compared with 50% who expected to be able to lower their premiums last year.
Looking specifically at critical illness insurance, Aon found that not a single insurer expects the cost of critical illness insurance to fall in the short term, while 29% are expecting to raise their costs.
For death in service pensions the situation was similar, with 29% of insurers predicting they would have to increase their rates.
Income protection insurance produced the most emphatic response of all, with 50% of insurers surveyed saying they would certainly have to increase their rates.
The situation is unlikely to improve as insurers move towards 2012, when the introduction of the Brussels-driven Solvency II initiative will force insurance companies to increase their cash reserves. Solvency II has been passed in order to strengthen the general standards of capital adequacy, and provide a more stable business environment for all European buyers of life and critical illness insurance, and income protection insurance products.
“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,” said Paul White, head of risk benefits consulting at Aon.
Aon Consulting’s annual survey of insurers and reinsurers covered companies with a combined group risk market of £1.5bn.
