Group insurance market reaches $40 billion

By Alain Thériault | September 21 2017 07:00AM


Total group insurance revenues reached $40 billion in Canada in 2016, according to the Group Universe Report by Fraser Group. While modest, revenue growth in 2016 relative to 2015 came mainly from rising drug costs.

"This is a first," said Fraser Group's president, Ken Fraser, concerning total sales, in an exclusive interview with The Insurance and Investment Journal.

Fraser Group’s report shows that total revenues generated by the group insurance industry in Canada in 2016 increased 4.7 per cent compared to 2015, (when they reached $38.6 billion). He points out that group insurance revenue growth in 2016 was higher than that of gross domestic product. Real GDP growth (excluding inflation) was 1.5 per cent.

Fraser says costly medications have driven revenue growth for group insurers in Canada over the past two years. “The major driver of growth nationally in both years was medical benefits (drugs and extended health care services).” Revenues from medical benefits increased 4.8 per cent in 2016 and 5.5 per cent in 2015, he said.

He notes that this increase was fueled mainly by new drugs. “The higher figure in 2015 may be partially explained by the introduction of new treatments for hepatitis C in late 2014,” he says.

According to Fraser Group, the growth in group insurance revenues by province was most pronounced in British Columbia at 7.9 per cent in 2016, compared to 2015.

Lowest growth in Alberta

Fraser Group recorded the lowest growth in Alberta, which Ken Fraser says is due to the drop in oil prices, which is slowing the economy of the province. “Alberta has experienced no premium growth and this result is linked to oil, as prices drop and plants shut down,” he said.

He also noted that Ontario and Quebec had slightly higher group insurance revenues than the national average between 2016 and 2015, reaching 5.4 per cent and 5.0 per cent, respectively.

No innovation or acquisition changed the group insurance market share ranking (see table), which remained concentrated in 2016. “Sun Life retained its position as the largest group benefits provider in Canada, followed by Manulife and Great-West Life, the same order as in 2015. The Big 3 carriers controlled 65 per cent of the market, approximately the same as in 2015,” he said.

Mature market

Over the next five years, Fraser says he expects slower growth in group insurance revenues which should not significantly outpace the growth of the Canadian economy. “The market has been pretty stable compared to last year. To a large extent, the market for group benefits is mature. Other than very small or very new employers, most employers have a benefit plan,” said Fraser.

Statistics Canada indicates that approximately 65 per cent of employees have benefits,” he added. “After allowing for waiting periods and non-enrollments, Fraser Group estimates that 80 per cent of employees work for an employer with a benefit plan. Some employees may not be covered but their employer has a benefit plan.”

Critical illness coverage

A major development discovered by Fraser Group is that employees are increasingly adhering to their group plan's critical illness insurance coverage. “While total group plan premiums for CI are still less than one per cent of total benefit spending on group benefit plans, the annual growth rate is over 10 per cent. The average rate for the last four years was 14 per cent,” he said.

Premiums for dental benefits increased by 3.6 per cent in 2016 compared to 2015, driven primarily by population growth and fee guide increases, he added.

Growth rates for life and disability benefits within group insurance plans were less than three per cent, driven primarily by wage increases and employment growth, he said.

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