There is a revolution in employee benefit packages with growing interest in flexible benefits and the approach of stakeholder pensions as some IFAs may be looking for alternative income streams.
It is a good time to market bespoke employee benefits packages, including private medical insurance, group critical-illness cover and group income protection options.
Offering a menu of options will make employee benefits appealing to employers of all sizes because:
It can be hard to get valuable staff back to work quickly when they rely on NHS treatment, particularly in areas such as the South-east where there is heavy demand for hospital beds.
Surveys have shown that, once a group reaches a critical mass, PMI pays for itself by reducing sick leave and time spent waiting for appointments.
For some employers, helping their employees to get treatment speedily is more than a purely commercial decision. There can be a moral obligation to assist sick staff in a practical way.
PMI helps companies compete for and keep quality staff. It fits in particularly well with group life and pension schemes as part of a holistic set of branded employee benefits. In industries such as the IT sector, where organisations are chasing a finite pool of talented individuals, it makes sense to bait the hook with the best quality package.
PMI can be marketed as a form of risk management as the employer has the reassurance of knowing sick employees will be treated promptly and come back to work more quickly than if they had to wait for NHS appointments.
Branded PMI schemes cost far less than if the employee were to insure himself under an individual policy.
Branded products have the extra appeal of being tailored to the needs of the employer and employees. A company employing mainly young, single people may need to offer different products from an organisation where a large number of employees are married with dependants.
Where flexible benefit packages are offered and employees are allowed to choose the products they want, a real value is placed on these benefits. BCWA's work with Scottish Equitable Employee Benefits has shown that PMI is one of the products in which most interest is shown by both employers and employees.
The PMI market is now worth around £2.2bn with just under 12 per cent of the population holding cover, according to analyst Laing & Buisson. Figures for 1999 show businesses now account for nearly half of the market, spending over £1bn a year on PMI. More than two million employees are now covered by schemes.
While individual PMI sales are falling, corporate sales have increased by 1.2 per cent. A recent survey by Employee Benefits magazine showed that one in five employers is willing to spend more on healthcare than at present For IFAs, this is clearly a market well worth studying.
Corporate PMI plans pay for treatment of acute conditions but do not cover primary care or chronic conditions. Big group schemes usually cover pre-existing medical conditions which smaller schemes exclude on grounds of cost. Average premiums are around £200-£500 a year per employee. Group schemes usually offer employees the opportunity of adding their spouse and children to the cover by paying an additional premium themselves.
Voluntary employee-paid schemes are also popular, with a third of organisations offering PMI operating on this basis. Employees almost certainly benefit from cheaper premiums than they would do if they were to take out individual policies themselves.
How should an IFA interested in offering products go about choosing an insurer? The following pointers form a starting point.
Does the provider show it values its relationship with intermediaries?
Does it have its own direct salesforce? If so, will this produce conflicts of interest?
Does it offer a wide range of products?
What are the provider's IT systems like? Will they provide you with detailed claim reports and analyses?
How do commission rates compare with its competitors?
Will the provider give support and development advice, preferably via broker consultants?
Are claims settled quickly?
Are free mailshots, training and exhibition packages offered on the products?
Will the provider's marketing approach dovetail with your own?
The IFA should encourage the client company to think about the following points.
Does the total benefit package meet the needs of the different groups the organisation employs?
Does it have a workforce that is predominantly young, single and highly mobile or with families? This will determine the mix of products offered on the menu. For example, a predominately young and unmarried workforce may value life insurance less than an older workforce.
Does the benefit package fit in with the overall business objectives? Does it help to attract and retain key employees and reward them for fulfilling their performance objectives?
Is the package well communicated to employees? Do they understand and appreciate the benefits?
Interest in benefit products tailored to the organisation's and employees' requirements will increase over the next few years. An integrated package enables a comprehensive range of benefits to be offered with a minimum of administration being undertaken by IFA and employer.
IFAs could have much to gain by exploring the possibilities of the market.