Corporate Adviser Group Risk Adviser Forum

1 February 2010 Corporate Adviser

The role of Group Risk Development (GRiD) in lobbying for a greater recognition of the benefits of group risk in the regulatory and tax environment was the subject of fierce debate at the Group Risk Adviser Forum in London last month.

Delegates were nearly unanimous in their approval of GRiD’s performance in 2009. Asked whether they thought GRiD had justified its increased charges in the way it has promoted group risk in 2009, 89 per cent said they had.

But Simon Derby, director of i2 Healthcare, who withdrew from GRiD last year in protest at its annual fee hike, said: “The government has got far bigger fish to fry than worrying about our industry.”

Delegates discussed whether the pounds, shillings and pence argument about health, wellbeing, rehabilitation and good work is a valid one, and questioned the extent to which government or employers should be interested in what the group risk industry has to offer. Some reflected on whether this is because the government does not believe the return on investment figures put forward by the industry.

Derby said: “I look at this from the perspective of what makes us money. And that is extending our network of clients and that is what we are about. I don’t think in the current environment there will be much of an appetite of any government to take up the cudgel of benefits. Yes we have fit note, but I would be surprised if they put any significant resources into that. GRiD is just another organisation and the chances of it being listened to are still slim.”

But Jamie Winter, head of healthcare and risk consulting a Towers Watson, countered: “The alternative is to do nothing, and that surely cannot be right. I think GRiD has done some good work over the last year, particularly in terms of having a loud voice in relation to legislation and meeting with government to talk about things like the default retirement age. That gives you the opportunity to go in and say ’you are a government who is trying to influence rehabilitation and doing the right thing by your employees. How can you possibly expect to do that if you take away the knees from something like group income protection, if you simply remove the default retirement age’.”

“There is always the risk of GRiD’s voice not being heard, but I think it is a louder voice than there has been. Having said that, will it succeed? I don’t know and we have got to plan for the fact that it might not,” said Winter.

Guy Roberts, director of Portus Consulting, said: “In the run-up to the election is not a great time to do it because the politicians have got other things on their plate right now, but I agree that the voice is louder.”

John Dean, head of health and protection at Punter Southall, said: “The NAPF has a good voice when lobbying on pensions. But in our industry the biggest players such as Bupa can’t get access to ministers. We are all too small to have a big voice, so the concept of an independent body like the NAPF supported by the industry makes complete sense and we need to support it as best we can. We all disagree on how much it costs, but we should all support it.”

Rebekah Haymes, risk and flexible benefits director at BDO, said: “I am getting my pension colleagues asking me about group risk, which shows that it is succeeding in raising the profile of our sector.”

Dean argued that lobbying was essential to ensure not only that greater recognition be given to group risk products going forward, but to make sure that more problems were not created down the line. Dean said: “Does the government really know what its actions actually result in? We have got these changes coming in from April. The impact of them on, for example medical insurance could be substantial. People won’t be joining pension schemes because of the 50 per cent tax, that will break the link between pensions and life insurance as we will no longer get execs joining pension schemes, and all of this is driven by tax. And if we can’t have a view in there about the best way of doing this, we are in trouble.”

Dean also argued that tax-breaks for group risk products should be promoted, and could even save the government money.

“Pensions get a tax-free element. In principle, IP and life should get the same tax benefit. If we could get any movement on tax, there would be a substantial change in our market overnight,” said Dean.

Derby said: “I agree it would make sense, but the government will not do anything that will reduce its tax revenues today.”

But Dean argued: “You could make a very reasoned argument that if companies do offer an approved income protection scheme, it’s a valid company expense, and people in receipt of it don’t get taxed on it, for example up to £30,000 on benefits, then the pressure taken off the Employment and Support Allowance would be immense, particularly if you made it an all employee scheme.” Delegates also discussed the state of the market, and whether the current price war had reached its peak.

Winter said: “Rates should have bottomed out before now. I think they haven’t yet, but all we are doing is waiting for a provider to blink. Someone is going to blink soon and say enough is enough, and say this is unsustainable. That provider will then lose a chunk of business, but then the others will follow suite. We are bumping along the bottom. We are talking to our larger clients about taking advantage now of that and locking in for three years.”

 

 

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