Politics, perception and growth
With the Frost / Black review petitioning the Treasury and ads on the TV, perception of group risk has never been higher. But repititional risk are also growing. Edmund Tirbutt reports
The news that the Frost/ Black review is pushing for changes to the tax treatment of services that improve employee health is welcomed by group risk professionals but when it comes to actual tangible government support, few are holding their breath. Chancellor George Osborne is being famously tight-fisted and the business case for group risk has never been easy to prove with pure facts and figures. A straw poll of delegates at last month’s Group Risk Adviser Forum found 57 per cent couldn’t see the Treasury being persuaded to change such tax treatment, while 43 per cent felt it would be persuaded but not in this Parliament.
Jamie Winter, head of healthcare & risk consulting at Towers Watson, said: “In the UK we talk a lot about sickness absence but not about return on investment, which we have enough difficulty in demonstrating to finance directors in an objective way. Dame Carol Black is trying to have this conversation with the Treasury on a much bigger scale, so we wish her the best of luck.”
Tim Johnson, managing director at Gallagher Risk & Reward, said: “In an environment where taxes are so much in demand it will be a tough call but I think we should try and find a way of looking at NI credits or similar structures. We should be supportive as an industry, and if we can feed HMRC a little idea it thinks it can afford it could blossom into reality.”
Feelings were also mixed towards ongoing welfare reform. On the one hand it presented an opportunity to demonstrate how the private sector could reduce the burden on the state, and 71 per cent of attendees felt that it would slightly increase demand for group income protection in the long term.
Chris Ford, director of group risk at Jelf Employee Benefits, said: “With or without tax breaks, the State can’t afford the costs of sickness absence benefits, so protection therefore has a role to play even though there is a clear difficulty with it being perceived as a luxury product. Employers will need rehabilitation and early intervention and, going forward, won’t be able to rely on the State to look after their employees because the system has changed. “
But Johnson pointed out that the Department for Work and Pensions (DWP) is now turning down so many claims that the Government could conceivably turn round and say that it’s being so successful in reducing costs that it doesn’t need to hand out any tax incentives to employers. Nevertheless, at least the income protection community was finally being granted another longstanding wish: namely raising awareness of its product via national TV advertising. With both Aviva and Unum having chosen to advertise during ITV’s Downton Abbey, they could hardly have made a greater splash, and 71 per cent of attendees expected the campaigns to boost employer and employee-paid group risk. Unum, in particular, was praised for breaking new ground by advertising group income protection directly to the consumer rather than through the employee benefits press.
Martin Hibbert, health and risk practice consultant at JLT Benefit Solutions, said “At this stage I think the ads are trying to raise awareness and put issues in people’s minds. This should help employers, as employees should show much more appreciation when they are told they have the benefit. We just have to hope this marketing campaign works as it’s a massive opportunity for us all if it does.”
Leighton Churchill, group risk and healthcare consultant at Johnson Fleming, said: “People watching the telly might start wondering whether they have income protection with their employer and it may pose the question of whether they should actually ask their employer if they have it. Or it may come up in the annual survey with regard to whether it should be a benefit in flex.”
The hope is that if the ad campaigns clearly work for Aviva and Unum then other insurers will join in and this can only bode well for a product that was universally considered to suffer from a lack of consumer education. The most fundamental problems felt to be in need of addressing were the misconceptions that ill health “will never happen to me” and that the State will take good care of you if it does.
Jelf Employee Benefits’ Chris Ford said: “People just can’t perceive themselves as being off long-term sick but I’m not sure exactly how you do educate them as we see people being told how bad smoking and drinking are for them but they still smoke and drink. So I’m not convinced that throwing statistics at people is necessarily the way to do it.”
As Steve Ellis, head of group risk at Premier Choice Group, pointed out: “People use pet insurance because in their eyes the NHS will be perfectly adequate for themselves but for their pets they want to replace an unknown cost with a given cost.”
For similar reasons people without protection cover don’t blink an eyelid at the thought of insuring their mobile phone, a situation described by JLT Benefit Solution’s Martin Hibbert as “just gross stupidity and a sad indictment of most people in this country.”
The misconceptions in fact extend well beyond these shores. Johnson described how he’d been at a conference in Las Vegas earlier this year and had been approached by two American benefits specialists who informed him that because he was British he didn’t have to worry about health issues.
“Their perception was that that all our long and short-term needs were catered for by the NHS” explained Johnson. “But in the US they have entire business mechanisms around wellness to get people to eat vegetables and stop smoking to be healthy just to protect their insurance policies because they know there’s virtually no help from the State.”
Delegates also stressed the importance of paying more attention to how group income protection itself is perceived. The fact that insurers refer to “disability benefit” was considered misleading because the product can cover all manner of illnesses and ailments without exclusions and can assist with the rehabilitation of claimants back into the workplace and help employers comply with health and safety legislation.
Clare Dare, group risk and flexible benefits director at Broadstone, emphasised the importance of insurers making much more capital out of the successes they have had with early intervention. One of her larger clients decided not to switch insurers for cheaper premiums because they were so pleased with the outcome of the early intervention and rehabilitation services they were receiving.
Dare said: “That sends out a very powerful message and I think there is a massive opportunity at the moment. Clients are all asking for help and this is how we can help them, but not by selling a product. I think we are guilty of not letting clients know of the number of claims their outlay is actually stopping them from having, and we should be ringing the bells more in this respect.”
However, Ellis also flagged up a potential reputational issue. He is concerned that the trend towards limited-term income protection could be storing up bad news for the future if people with progressive illnesses suddenly find that their benefit periods have come to an end. The MS Society and other parties that providers need to have on their side could therefore start getting very annoyed.
“We’ve got to really start saying that income protection protects for the long term and that it’s how it’s funded that is the question,” said Ellis. “If the employer provides a limited-term benefit and the employee chooses not to extend it despite being offered the ability to do so via an appropriate extension then that will be the employee’s decision. So there’s a lot to be said for offering employees the chance to take a low-cost individual extension at outset with a free-cover limit.”
Provider technology and electronic capability were not considered deal breakers by anyone, although 71 per cent of attendees considered e-commerce to be important, and most indicated that it was of far more use for small schemes than for larger ones - which have different dynamics, needs and underwriting discussions. Churchill said: “You can already get online quotes for up to 100 lives but whether or not it will work on a larger scale online I’m not sure. Ellipse is trying its best to do that and it will be interesting to see how it targets its income protection product when it launches it as it’s hard to shift income protection clients away from existing insurers.
“We’ve only really found online quotes useful at the stage when we are just testing. It’s nice that Ellipse is offering something different and it can be competitive on a few occasions although we haven’t yet done any business with it. We see more of Zurich, which went back to the drawing board and worked hard and has been competitive this year on the life side and backed up by good service.”
Hibbert explained Zurich’s resurgence by the fact that it had finally decided to buy business on the realisation that it was pretty much the only way to get foothold in market. “Covers are similar so the thing that really differentiates insurers at the market review is price” he explained.