The industry knows group risk benefits are valuable, but does anyone else? The sector needs an image boost to thrive, says Peter Fenner.
It is not clear yet whether the impact of NEST on group risk benefits will be good or bad. On the one hand, benefits as an idea will be in the minds of employers and employees, so we may see the demand for them generally to increase.
On the other hand, employers compelled to contribute money to NEST may feel that there is no further money in the pot for other benefits. In the worst case scenario, some employers might even look to cut their non--pension, non-compulsory benefit provision – such as death and disability cover – to meet the cost of NEST.
Yet to come is the implementation of the radical changes to the benefit system introduced by Secretary of State Iain Duncan-Smith. If they work, it could become much simpler to design and market group risk products because much of their current complexity is driven directly by the need to integrate with the -elaborate existing range of state benefits or comply with complex rules.
The key phrase in that last sentence is, of course, the first one: previous attempts to ‘simplify’ benefits have often been diluted to the extent that they have served only to add a further layer of confusion to an already bewildering set.
At least having the ear of policy makers should help prevent measures coming in that solve one problem, in the world of pensions, only to create another that plays havoc with group risk. The more the government appreciates the part group risk benefits play, the stronger the industry’s hand.
Engagement with members
Living in a democracy as we do, this hand is strengthened even more if it can be shown that group risk benefits are dear to the hearts of employees and employers. Unfortunately, this is not broadly the case, which brings us on to the value of group risk at the micro level.
It seems self-evident that those in receipt of payments following death or critical illness, or during long-term illness, will appreciate the value, but there is no hard evidence to demonstrate this.
Perhaps it is considered poor form to ask people who have suffered a bereavement or serious illness for a few comments on the impact of receiving claims payments.
But the best advocates for any product are those who have derived the most benefit from it.
How many insurers or advisers ask claimants for testimonials to promote the value of these benefits to others? Making a claim may be the first inkling a member or their dependant has that there is group risk cover in place for them.
Ironically, it is thanks to the inclusive and automatic nature of scheme membership – broadly, satisfy the eligibility conditions and you’re covered – that members can sail through their whole working lives with no or little awareness of their cover. That is, if they are allowed to.
The way flexible benefits are delivered points to ways in which communication of benefits to employees can be achieved. One of the key advantages of flex schemes is that they directly engage the scheme members, who have to make decisions about the types and levels of the various benefits on offer.
Annual benefit statements are produced as a matter of course, but there is no reason why these cannot be on offer for all types of scheme, flex or not.
Pay may be the most important and visible part of an employee’s overall reward for employment, but it is far from the full story for those with added benefits. But ultimately, it is in the interest of employers, advisers and providers alike for there to be clarity over the full extent of the extras that employees enjoy.
Other communication points arise. With group life schemes, obtaining a note of how members want benefits paid in the event of their death to be distributed should be accorded the same importance as having a trust associated with individual life policies.
With group income protection benefits, every time someone is off sick, even if the absence is just short term, is a chance to remind them of what their employer’s sickness absence policy – short- and long-term – is and, ideally, what the employee would receive if there were no company benefits in place.
Now is a great time for advisers to get into the group risk market if they aren’t already. Unlike other forms of long-term insurance, group risk products are already designed in a way that will fit neatly into the post-RDR environment.They offer an excellent way for advisers to introduce their services to new corporate clients.
More providers are starting to offer online propositions, which make writing small schemes a much more viable proposition for advisers to sell, and will make larger schemes much easier to integrate with existing employee benefit platforms. First and foremost, though, the key to success is to bridge the gap between group risk cover’s perceived (low) and real (high) value.
Peter Fenner is communications manager at Ellipse
