Aon Consulting's annual survey of insurers and reinsurers who provide group risk benefits in the corporate market found that the underlying cost of providing lump sum life assurance, death-in-service pensions, income protection and group critical illness to employees was cheaper in 2009 than 2008.
The survey found 50% of insurers and reinsurers believe they will have to increase the cost of income protection insurance.
In a major U-turn from last year, when half of insurers predicted the premiums for lump sum life assurance would decrease, 50% now expect rates to remain steady while 38% expect rates to increase.
Not one insurer expects the cost of critical illness cover to decrease, while 29% expect to see increases.
This means employers can expect costs to remain steady or increase for death-in-service pensions, with 29% of insurers and reinsurers expecting an increase and 57% expecting rates to remain on hold.
Paul White, head of risk benefits consulting at Aon Consulting, said: "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 among insurers that costs are likely to increase.
"Insurance underwriters and brokers have already seen employers cutting back on these type of benefits, offering cheaper alternatives or shifting the cost to employees. This trend is likely to continue, particularly if the much speculated ‘double-dip' recession does come to fruition, and companies potentially look at benefit reduction as a cost-saving measure.
"Companies should make sure they take advantage of the cheaper costs while they persist. For the future, the picture might not be rosy. However, companies should not jump straight to cutting their benefits programme. Companies should be working with their advisers to build and evidence a culture of managing risks and taking action to control claim costs, from wellness strategies to active absence management programmes."
