Group risk markets have a bright future, but, says Lee Watson, risks of getting quotes and applications wrong are increasing.
Business and process reengineering was inevitable prior to the application of the Retail Distribution Review (RDR), but seems unabated after too, as profit margins continue to be put under extreme pressure following the withdrawal of indemnity group pension commission.
Group risk wasn't subject to the RDR but this hasn't stopped the industry being drawn in by its close association with group pensions.
If the application of the RDR wasn't significant enough, auto-enrolment is all-consuming from a group pension perspective and will continue to be for a number of years yet, and, until such time as this slows down, will be the focus of investment and resource in order to help employers comply with the new legislation.
BIS (government Department for Business Innovation and Skills) estimated, in its 17 October 2012 report, that approximately 30,000 medium-sized employers will start staging from 1 April 2014 and approximately 4.7 million small employers from 1 June 2015.
Auto-enrolment also presents a fantastic income opportunity for group risk, and while the jury's out as to whether this will materialise, surely our entrepreneurial spirit won't stop us trying to take advantage of arguably the most opportunistic piece of legislation ever to be applied to the group protection industry.
One can only sympathise with intermediaries as they continually deliberate over really difficult decisions but ultimately the client will be compromised if group risk resource continues to be diverted away in the constant search for and maintenance of profit.
It should therefore be expected that these decisions may accelerate errors and omissions resulting from the lack of time, attention to detail and competency deterioration. It is imperative these risks are acknowledged and managed to make sure the employees of the client are fully covered for their maximum level of benefit.
The liability of getting group protection wrong is arguably more significant than group pensions and the answer to the constant challenge faced by intermediaries is standardisation.
Mitigating group risk liability starts with the quotation request and - considering this is an industry with many years of experience, some really talented individuals and more than a £1 billion of premiums remitted each year - surprisingly, a standardised Origo quote request format remains outstanding.
In addition, doing things like forwarding quote requests via email with a policy summary and attaching excel membership data to insurers in today's technology-rich environment is simply embarrassing. Data could be sent electronically via XML, for example, as it was designed to do.
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