LONDON - 21 January 2005 - Eight out of ten UK employers list the rising cost of premiums as one of their biggest concerns when renegotiating private healthcare arrangements for their employees, according to Aon Consulting’s review of the benefits market in 2004.

The firm’s 2004 Annual Benefits Survey¹ revealed that four in ten employers (51.6%) surveyed experienced a rise in excess of 6%.  The average single subscription rate currently stands at between £301 and £350. Aon Consulting expects this to rise above £350 by the end of 2005.

In light of rising costs in private medical insurance benefit provision, organisations are increasingly using an excess as a means of controlling premiums and driving down claims expenditure by deterring ‘trivial’ claims and making members ‘think twice’ before seeking private treatment, with 43.5% of respondents choosing to operate an excess in 2004, compared to 36.5% in 2001.

Another key mechanism being introduced by large corporates to control costs is self-insurance.

Commenting on these findings, Jane Gibbs, Head of the Healthcare & Risk Benefits Practice at Aon Consulting said:

“Companies are under more pressure than ever before to remain vigilant when it comes to costs, whilst continuing to provide competitive benefit packages to attract and retain a highly skilled workforce.  As premiums rise, employers are seeking new methods – such as self-insurance – of controlling their benefit provision expenses by being more cost effective.  To this end we predict that the trend to self-insure for large organisations will grow, as organisations recognise the added flexibility and the tax efficiencies that this affords them.”

Other key issues for employers include the lack of employee appreciation of private healthcare arrangements, cited by over half of employers (52.4%) polled. Ms Gibbs added: “There are a number of relatively simple steps that employers can take to improve employee appreciation of their benefits and the most effective of all is via a concerted benefits communication campaign.  After all, there is very little point in spending millions of pounds on insuring your workforce if you don’t tell them about the benefits with which they are provided.  Ensuring that employees realise the value of the benefits provided is crucial to building their appreciation of the benefits offered.”

Aon Consulting’s Annual Benefits Survey covers three key areas:

• Group Life Assurance: employers cited medical underwriting requirements (36.8%), the imposition of event limits restricting cover on catastrophe (32.8%), and the late notification of premium requirements (32.4%) as the three biggest issues for them.  The survey found that over three quarters (76%) of respondents provide some form of life cover for employees and as many as seven in ten employers (70%) said they continue to provide comprehensive lump sum benefits to their entire workforce.
• Group Income Protection: issues facing employers in the Group Income Protection (GIP) marketplace include increasing costs (38.2%), claims assessment (35.8%) and integration of their GIP policy with their absence management programme (28.8%).  Only four in ten respondents (41.5%) have been with their current insurer for less than three years. The survey found that six in ten employers’ (59.6%) main motivation for moving insurer was to achieve a financial saving.
• Private Medical Insurance:Respondents highlighted increasing costs (80.9%), lack of employee appreciation (52.4%) and an increasing number of claims (45.5%) as the top three issues facing employers providing private healthcare arrangements.

Notes to Editors:

1. The survey was conducted amongst 288 employers, representing an approximate workforce of 420,000 staff or 130,000 insured members.  Of those surveyed, almost 30% employ more than 1,000 employees, 11.6% employ less than 50 people.
2. Please contact Lisa Ford on 0800 279 5588 or email: enquiries@aonconsulting.co.uk for a copy of Aon Consulting’s 2004 Annual Benefits Survey.

About Aon Consulting

Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues.

Aon Consulting is a division of Aon, the UK’s largest insurance broker and provider of risk management services, a major force in reinsurance and the UK human capital consulting market.

Aon Consulting Limited is authorised and regulated by the Financial Services Authority.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors.  Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, resolution of pending regulatory investigations and related issues, including those related to compensation arrangements with underwriters, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, and the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure.  Further information, concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.