Ian McKenna: How technology is reforming the group risk market
The group risk market has long been in need of change and the efficiencies achieved in group pension processing are for the most part conspicuously absent.
Canada Life and Legal & General have or are on the verge of implementing adviser-facing technology- driven processes but one provider, Ellipse, leads the field. In a market still dominated by paper, it has embedded technology throughout the entire group risk process.
From the scheme quotations, through to acceptance including underwriting of cases over the free cover limit, Ellipse, which is a subsidiary of Munich Re has revolutionised processes, with enormous benefits for advisers, employers and scheme members.
Until now, its proposition has been limited to group life and group CIC cover. This is about to change and the approach it is taking to group income protection is even more revolutionary than its current product set. The Ellipse group IP product launched on February 1 and customers will still be able to benefit from its market-leading technology in both quoting for and establishing new contracts but clients will also benefit from a mandatory early intervention called Interact Plus from outsourcing specialist Absence Care.
The new process begins from the first call that the employee makes to report an absence. This is no longer made to the employer but to a central call centre run by Absence Care who will take all the details necessary about the absence and the reason behind it and inform the employer by email, SMS or other agreed means.
By taking such a day-one approach, Ellipse believes it will be able to identify any patterns of absence that may indicate potential long-term problems and in so doing achieve significant long-term economic benefits for the employer by managing these before they become an issue. It will also identify any welfare benefits for the employee.
The majority of long-term absences are as a result of mental health and musculo-skeletal issues. Because an employee’s GP is exactly that, a general practitioner not a specialist, all too often they will sign off an employee from work when, in practice, that person would be better off in the workplace with the right support.
This can mean the true cause of an issue may not come to light for months or longer. Because an absence management specialist has access to specialist support therapy or physiotherapy, the managed approach can make such services available much earlier with consequent long term health benefits to the employee. Processes like these also have the potential to reduce potential human rights issues as well.
Ellipse sees this as part of its risk-mitigation process, which it believes will reduce its long-term claim cost and the company is picking up the cost of this service. It is great to see an insurer putting its money where its mouth is in this way.
It is a policy condition that the absence management service is used by employers, although the company will also introduce a more traditional product, requiring long-term absentees to be put forward for intervention after four weeks, in quarter two this year.
The same market-leading group risk quotation system that is used for its original products has now been extended to cope with group income protection quotes.
Advisers can select benefit levels of between 50 to 75 per cent of salary, decide which state benefit definition is required, choose from a range of own or any-occupation options and cover to a selected age or for two, three, four or five years as well as a range of escalation options.
Essentially, this service is offering a very wide range of options which should be able to cater for just about any established scheme. This will produce the necessary quotes as outlined.
When the adviser wants to proceed, the system now generates the application capturing all the disclosures from the quote process. This is forwarded electronically to the client, who sets up their security process and digitally signs the proposal. This enhancement applies to Ellipse’s present product range as well as the new IP cover.
This is a welcome development overall but I feel Absence Care’s process falls down in one area in that although I can understand why the employee would notify absence to them first, I think some employers will also want a call-forwarding service where calls can be passed to the employer after the initial absence registration so the business can speak to the staff member about any work requirements that will be covered while they are away.
It is also important to recognise that some employers will have other existing processes they will want to maintain which are important for other reasons.
The service also delivers a powerful reporting tool to HR staff at the employer. An online My Absence Management function gives access to a suite of management processing and reporting tools. It includes analysis of the extent of absence over a range of time periods, recording individual absences and the action taken at each stage of the process. This also addresses absences for reasons other than sickness where there may need to be follow-up activity.
In practice, this portal is delivering a management and reporting tool free of charge within the group IP product that employers might other-wise have to subscribe to at additional cost.
Anything that helps employers reduce absence and manage their staff better must be worthwhile and this should give many advisers the opportunity to raise group risk cover with employers as a way to manage HR cost more effectively.
Ian McKenna is director of the Finance & Technology Research Centre