Employee benefit market trends 2023 

Mercer’s experts analyse market trends in healthcare, group protection, dental cover and pensions from the first half of 2023.

Healthcare, group protection, dental cover and workplace pensions have all seen significant market changes this year, as inflation, the cost-of-living crisis and demand for private medical treatment impacts employees and employers. We look at current market trends and future directions for core employee benefits.


We see increased take up of private healthcare schemes. Future evolution in the healthcare market will influence how care is financed and structured.
  • Market trends

    • Private hospitals are reporting a substantial increase in self-paid treatment, as NHS waiting lists are expected to continue to increase.
    • More employers are adding dependants to private medical schemes and expanding cover to previously ineligible groups of employees. 
  • Pricing

    • For schemes of more than 200 lives there could be increases of 30% to 40% in proposed 2024 renewal terms. 
    • Future claim projections vary from provider to provider based on underwriting optimism.
  • Claims

    • All providers have seen increases in demand since the beginning of 2023, with some reporting an increase of more than 25% in claims activity.   
    • Calls to member helplines are often covering more than one condition, driving longer, more complex calls. Providers are struggling to recruit and retain employees in a competitive labour market.   
    • More people are seeking help and making claims for mental health conditions.  
    • Easy to access services and primary care through virtual GPs are driving up diagnosis and associated treatment.   
    • Employers can mitigate these challenges by promoting claims portals and suggesting that helplines are best avoided at the busiest times.  
  • Funding

    • Master trust: More clients are choosing master trust with the benefit of outsourced governance. However, there may be limitations such as eligibility related restrictions that must be taken into account.  
    • Standalone trust: Most large schemes still operate through standalone trusts, giving more autonomy and ability to tailor provision to specific needs. Increases in high-cost claims mean trusts are reviewing their provisions such as specific and aggregate stop loss levels.  
    • Captives: We see challenges for captives in balancing market competitive pricing and premium volumes at a level that can still drive profit. 


Consider a market review exercise as current pricing conditions could offer potential savings.
  • Market trends

    • Total market premiums for group protection now exceed £3 billion. The number of policies increased by 3.6% in 2022.  
    • Administration remains a challenge for providers. Issues include slow claims handling and delays in producing renewal accounts.  
    • Added-value services have become a key focus, with some providers offering as many as 30 different elements, but pathways must be clear and avoid overlaps.  
    • Continued provision of cover for employees based overseas is a common issue and there have been changes in the regulations for UK based providers.  
    • Changes to the Lifetime Allowance, announced as part of the Spring Budget, have created uncertainty over the tax treatment of benefits.  
    • Many new Group Income Protection schemes are designed with a limited payment term, rather than payment to State Pension Age.  More employers are extending cover to under-represented groups.  
  • Pricing

    • Group Life Assurance: Mortality is still above the five year average, but the gap is reducing. As a result, providers’ pricing is inconsistent and offers opportunities for savings.  
    • Group Critical Illness: Overall, prices are increasing. This is being driven by higher claims activity linked to delayed diagnosis as a result of the pandemic.  
    • Group Income Protection: There have been lower volumes of claims, as well as higher interest rates and associated yields. These factors are currently outweighing the negative impact of NHS delays, creating a softening market and a basis for lower prices.   
  • Claims

    Group Life Assurance and Group Critical Illness claims have increased in 2022 compared to 2021, but Group Income Protection claims have fallen. 


  • Group Life Assurance

    • Main causes of claims in 2022: cancer, heart disease, stroke and respiratory.  COVID-19 drove less than 4% of all claims  
    • Average value of all claims: £120,000  
    • Average age of a claimant in 2022: 54 (source: Aviva)
    • Increase in claims caused by accidents, as consumers move back towards pre-pandemic travel patterns. 
  • Group Critical Illness

    • Main causes of claims in 2022: cancer, heart attack, stroke and multiple sclerosis.  
    • Increase of c.22% in claims paid between 2021 and 2022.  
    • Average age of a claimant in 2022:  47 (source: Aviva).
    • 78% of all claims were paid.  
  • Group Income Protection

    • Main causes of claims in 2022: cancer, mental health, musculoskeletal and neurological 
    • Average age of a new claimant in 2022: 49 (source: Aviva)
    • Just under 40% of all referral cases returned to work before the end of the deferred period.  
    • Work related factors continue to be a significant contributor to declined Group Income Protection claims. 


Competition for business remains strong leading to potential savings, especially through preferred provider facilities.
  • Market trends

    • Bupa is closing/consolidating around 80 dental practices  
    • Cigna is exiting the UK dental market. 
    • Less than 1 in 10 dental practices now take on NHS patients.  
    • NHS banding costs within England increased by 8.5% in April 2023.  
  • Funding private dental treatment

    • Cash plan provisions often do not cover the full cost of treatment.  
    • Lower levels of cover provided through some private dental arrangements may only meet around 50% of treatment costs.   


The defined contribution pensions market remains competitive and there is a strong case for provider reviews. 
  • Market trends

    • The pensions master trust market continues to consolidate with two acquisitions announced in July 2023. 
    • Pension scheme members are changing the way they take benefits through retirement and providers are reconsidering their default investment strategies as a result.  
    • Providers are developing more sophisticated member portals and apps to attract new clients.  
  • Cost of living crisis

    • Despite the cost of living crisis, data from leading pension providers show no significant rise in members opting out or stopping contributions.   
    • Employers are supporting members with financial wellbeing tools and considering re-designing pension contribution rules. 
  • Lifetime Allowance changes

    • Employers are starting to review cash alternative policies for employees, as proposals to abolish the Lifetime Allowance charges from 2024/25 were announced in the Spring Budget.  
    • Fewer members will be impacted by the Tapered Annual Allowance (TAA) in future. Employers are updating associated policies and flexible benefits systems. 

Actions for employers

We are seeing competitive pricing in several employee benefits markets at present, especially in group protection benefits and pensions.
  1. Consider carrying out market reviews to take advantage of pricing opportunities in the market.
  2. Legislative changes, such as the proposed abolition of the Lifetime Allowance charges, will have future implications. Reassess rules and policies that relate to these changes.
  3. Evaluate benefits strategies to ensure they are fit for purpose and that there is sufficient cover across the workforce.
  4. Understand trends in claims within your own workforce and use this information to plan for future cover.
  5. Prepare for substantial pricing increases in healthcare insurances, reflecting greater use and medical inflation.
  6. Competitive pricing in the protection market opens up opportunities to counter some of the increases being seen in healthcare insurance.
Information contained herein has been obtained from a range of third party sources and may change in the future. While the information is believed to be reliable, Mercer Marsh Benefits has not sought to verify it independently. As such, Mercer Marsh Benefits makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential or incidental damages), for any error, omission or inaccuracy in the data supplied by any third party.
Mark Waters

- Market Development Leader, UK, Mercer Marsh Benefits

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