How to take advantage of auto enrolment - F&TRC

There is an almost unanimous view in the group risk market that auto-enrolment is a major positive for the  corporate protection space. Many advisers and  product providers have already embraced this attitude, but how much has actually translated into new business?

With all employers now duty-bound to enrol their employees into a qualifying scheme, this provides the perfect opportunity for advisers to review their clients' group risk arrangements or open dialogue to introduce protection for the first time.

 The key to successful auto-enrolment is processes, data, payroll and pensions. For auto-enrolment to operate seamlessly and successfully it relies on an exchange of data between all parties.

Integration between payroll and pension providers

is vital. Many pension and software providers claim to have detailed integrations with payroll providers, but in reality this is often not extended past an excel file (CSV) transfer.

While this may be sufficient for smaller employers, when looking at larger and, more importantly, transient workforces a more sophisticated integration would be desirable.

F&TRC has already carried out extensive analysis on data requirements for auto-enrolment as part of our Adviser Workplace Forum Group. As data is now being collated and processed on a monthly basis to facilitate an auto-enrolment pension scheme and keep The Pensions Regulator happy, could this not also help benefit group risk new business and renewal process?

For example, should group risk providers enable their quotation systems to be able to generate employer-specific quotes, based on data extracted from auto-enrolment, if it is enhanced by the necessary additional items?

Historically group risk renewal data has been collected annually and is therefore often not fully reflective of the current situation. Although some might say this new approach could create additional work, as member data would be collected and analysed 12 times a year as opposed to once, surely this would mean group risk renewals are being produced on a more accurate basis and costed more appropriately.

In practice, producing more accurate data more regularly could reduce the inevitable frustrating dialogue with the employer where a member may have been removed from a pension scheme months earlier yet still shows up on a group risk renewal schedule.

Payroll will already hold the majority of the data fields required for a protection case, as auto-enrolment necessitates the capture of members' basic details such as name, gender, date of birth and salary.

Two further fields that would be needed in addition for a protection case are the member's occupation and work postcode, which should be easily obtainable from HR systems.

Cutting costs

If group risk data were collected on a monthly basis as part of the auto-enrolment process, could this not reduce premium costs, as they are being calculated on more accurate data, as well as  reducing the annual administration burden?

This would also reduce the risk of providers breaching ICOBS 6.1.5 & 6.1.6 by failing to deliver renewal documentation in a good time. Such savings could offset the cost of auto-enrolment.

This could also help remove the separate issue of late renewal notices, which our research in 2012 showed are being issued up to six months after the renewal date.

As an example, at the time of writing F&TRC has just been notified by one of our own group risk insurers, ten days after the annual review date, of a requirement for additional underwriting for half of the workforce.

Anything that can be done to streamline or improve the current renewal process must be seen as a benefit. It is not unreasonable to say the current process is outdated.

 The majority of group risk providers have not changed their practices for many years. Research has identified most advisers would like to see more investment in technology in the group risk market.

By using auto-enrolment data instead of needing both renewal invitations and reminders, group risk providers could present an accurate renewal summary in a timely fashion.

Our dialogue with advisers suggests it is strongly felt that there would be benefits in harmonising data collection to embrace a similar process to pension renewals, with data and changes being captured on a monthly or quarterly basis.

This could also be a double positive for providers that operate in both the pension and protection spaces. My understanding is there is still not really any connectivity between the pension and group risk departments within most organisations.

However, they would appear to offer an opportunity for greater consistency. 

Jason Green is head of workplace research at the Finance & Technology research Centre (F&TRC)