The past few years have seen calls for product innovation in corporate markets. Unfortunately, none of these new developments have really taken off. Stuart Shaw calls for a different approach.
The corporate health and protection market, while not stagnating, is hardly booming, so we need to ask what the industry as a whole needs to do to improve it.
As readers know, there are some serious strategic issues that are being grappled with, the foremost being medical inflation, which continues to rise, and while the recent Competition and Markets Authority (CMA) investigation might influence a temporary halt or slowing, realistically the longer-term drivers are upwards.
Insurers are saying they will pass on any savings that the CMA remedies generate to policyholders, but none have actually said how much they think those savings will be. It is public knowledge that BUPA is aiming for significant savings in provision.
In its financial statement this year, it said it has already had some success in controlling costs. But understandably, the first home for any savings is likely to be restoring much-needed cushions and profitability into its own block of business.
What we really need is sustained growth in the market, but to achieve this we need much more consultation between product providers, clients, consultancy firms and advisers.
Variations on old themes
Innovation is to be applauded, and providers are doing a very good job at trying to push things forward. But too often, they work in a vacuum, or if engagement takes place with regard to product innovation, it is only after core decisions have been made. As a result, we continue to see variations on old themes, rather than revolutionary new ideas.
As advisers, we need to become far more involved with the insurers to provide feedback on how they can make their products work better for customers. Critically, this must be done against the background of what is profitable and practical to provide.
It seems clear that we are now entering into a time of employer re-engagement, with their benefits packages following the corporate austerity post-2007, and the administrative and financial uncertainty that auto-enrolment has created.
If there was ever a perfect time for advisers and insurers to have full and meaningful discussions about product development it is now, as employers are taking a strategic look at their offering and many are not satisfied with what they have.
The feedback is clear: employers don’t think the current products are quite right, they are not happy with the service they receive, and they are seriously concerned about where pricing is going.
However, very importantly, they don’t want to walk away from their perceived responsibility to offer a comprehensive employee benefits package, although many have considered this.
A healthy workforce
Employers recognise that with continuing NHS and welfare reform there is an increasing need for them to keep an ageing workforce healthy and engaged in work as long as possible, and to encourage younger employees to improve and maintain their health.
Employers want to understand how they can use their benefits better. Historically, changing needs have created knee-jerk reactions to product development, and many would argue that this has led to product tweaking – either trimming or bolting on ancillary features – which is why there are so many very slightly different products on the market.
Currently, the most common products are designed to be all things to all men. While this is understandable, it can mean that many product features are not relevant to all businesses.
While it seems obvious, businesses differ dramatically in their needs. For example, organisations that are running production shifts through the night and delivering ‘just in time’ have specific health and absence issues, which may be very different from those faced by a merchant bank or an oil company, yet they are likely to have almost identical insurance products.
More prevention, less cure
What we need are products that can be customised to manage cover and price. The big issue for any organisation that really wants to take control of their health and wellbeing spend is what their business and their workforce will look like in the future.
With the biggest drivers of PMI pricing being cancers and heart conditions, and with musculoskeletal and mental health conditions creating long-term absence claims and demands on management time, businesses need to address what they can do to mitigate risk. Lifestyle can play a part in all of these conditions.
