Robin Hyndley looks at what the latest DWP proposals mean for employers and employees, and explores how insurers could provide appropriates in the current environment.
These products could include group personal accident and critical illness-style cash plans that provide cover for accidents, injury or illness resulting in employees being off work for more than four weeks. The issues that need to be considered are how these products would dovetail with the NHS assessment programme and what elements of intervention can be funded.
The DWP reforms may also trigger an opportunity for employers to reconsider their duty of care in practical as well as financial terms. Initiatives designed to support the health and wellbeing of employees in relation to common issues such as repetitive strain injury, back problems and stress might work well alongside better targeted financial benefits.
Duty of care will also become a more onerous consideration as employers confront the impact of an ageing population and the extended retirement age. With the increasing success of modern medicine, people are both living longer and recovering from serious illnesses that five years ago may have been life limiting.
This means employees are now able to return to the workplace, and to work for longer, but may not be as robust physically or mentally as they were prior to their illness. So this creates a new challenge as to how insurers work with HR functions and their insurance brokers to link and integrate health and wellbeing services with insurance benefits.
Unfortunately, a raft of insurance products have failed to hit the mark, whether with employers or staff. One reason for the litany of failed products is over-complexity: employees and employers do not understand what benefits are on offer, or find it hard to differentiate between products.
This confusion means sales of term assurance and critical illness products are broadly static, while whole-of-life cover is declining. According to insurance industry data, IP is growing in acceptance and popularity – sales were up 8.7% in 2012, whereas sales of critical illness are only growing modestly (up 1.7%), and whole-life product sales are down considerably (-14.1%).
This suggests the insurance industry needs to rise to the challenge and deliver a broader range of solutions that are better designed to meet the future needs of customers.
There is clearly a need for new solutions that work alongside pensions – and which support employees at all levels in a company should they not be able to work due to accident and sickness – to offer genuine value for money to both employers
and employees.
Perhaps it is time for the DWP, the insurance industry and employers to think outside the box and tear up the current rulebook that separates state and private provision.
There has to be a way insurance providers could work more closely with the DWP and the NHS so that the financial protection provided through insurance products such as group personal accident plans, cash and critical illness plans could be channelled to support employees following an accident or sickness that leaves them unable to work.
This kind of approach would help employers both fulfil their duty-of-care responsibilities and achieve their strategic goal to drive improved return on investment from an approach to staff recruitment and retention that offers a better structured, more inclusive benefits package for the whole workforce.
With millions of employees in the UK now auto-enrolled in a pension scheme, workers are required to put an element of their wages aside for future use. This initiative means the blueprint is already in place for discussing financial protection in the workplace, and offers employers the opportunity to leverage their existing investment to implement better benefits for the whole workforce without adding substantially to costs.
There clearly is a role for IFAs, employee benefits consultants, insurance brokers and insurance providers to provide more and clearer advice on the products currently available. In addition, there is a need for employees and employers to be consulted about the design of new solutions, and insurers and brokers need to keep an open mind as to the best options.
We need to seize the initiative, and challenge existing thinking, practices and products, to see if we can create workable product solutions that bridge the gap between state and private provision.
After all, if we can deliver a range of value-added services to employers and employees that broaden their appeal and relevance to a much larger percentage of the population, we will all benefit.
Robin Hyndley is head of accident & health UK and Ireland at ACE European Group
