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In good Company

A recent CBI survey showed that 192 million working days are lost each year because of employee sickness – 7.8 days per employee or £434.

A total of 861,000 people are off work sick each year, amounting to the combined populations of Essex and Warwickshire. All this costs employers £10.7bn a year.

Sickness absence may be one reason why the proportion of the population covered by PMI under corporate schemes has remained fairly constant while the the number of people whose PMI cover is not provided by a company has fallen. According to Laing & Buisson, there are four reasons why company-paid PMI continues to grow:

Underlying strength of corporate economic performance – companies have more to spend on benefits.

Strategic price discounting – economies of scale allow insurers to offer employers better deals than individuals could buy.

Increased concentration of marketing – insurers and intermediaries are waking up to the opportunities offered by the corporate market.

Changing employers&#39 attitudes to PMI -more strategic concentration on employee benefits, their costs and their contribution to overall business objectives.

The last point is worth more examination. Employers spend large amounts on benefits and are keen to get the most from their outlay.

They choose PMI because it helps them compete for and retain quality staff. PMI fits in particularly well with group life and pen-sion schemes as part of an holistic set of employee benefits.

In industries such as IT and the new technology sector, where organisations are chasing a finite pool of talented individuals, it makes sense to bait the hook with the best quality package.

With almost constant media coverage of the problems of the NHS, medical insurance is one benefit that prospective and existing employees will be keen to have. There are also a number of other reasons why employers want PMI in the package.

It can be hard to get valuable staff back to work quickly using the NHS, particularly in areas like the South-east where there is heavy demand for hospital beds. Surveys have shown that once a group reaches critical mass, PMI pays for itself by reducing sick leave and was-ted time 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 very practical way.

PMI can be seen as a form of risk management, as the employer has the reassurance of knowing that sick employees will be treated promptly and come back to work more quickly than they would if they had to wait for NHS appointments. There can be costs of retraining staff who have been off work for a long period waiting for treatment and there is the expense of temporary staff to cover.

Corporate PMI schemes cost the employer far less than it would the employee to insure himself under an individual policy.

For the intermediary, selling PMI can be part of an integrated cross-selling policy, which also includes PHI, critical-illness cover, group life insurance and group pensions, enhancing the client&#39s perception of the services offered and the possible commissions available.

How should the IFA and client company approach PMI in the context of the overall benefits package? The following points should be considered:

What are the overall benefit objectives? How do these dovetail with the company&#39s overall business strategy? Does the benefit package help to attract and retain key employees and reward them for fulfilling their performance objectives?

Does the total benefits package meet the needs of the different groups the organisation employs? Does it have a workforce that is predominately young or single or highly mobile or with families? This will determine the mix of products offered on the menu.

Is the package well communicated to employees? Do they understand and appreciate the benefits? If they do not, a lot of money is being thrown away.

Interest in fully integrated benefits products, tailored both to the organisation&#39s and employee&#39s requirements, is likely to continue to increase over the next few years. A recent survey by Employee Benefits magazine showed that one in five employers is prepared to spend more on healthcare.

Offering bespoke PMI products as part of a branded menu of employee benefits will make them particularly appealing to employers of all sizes.

Branded products have the extra appeal of being tailored to the needs of a particular emp-loyer 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 the employees are allowed to choose the products they want, an even greater value may placed on these benefits.

As far as the intermediary is concerned, helping client organisations to consider PMI in the wider context of benefits and reward could bring big rewards in terms of commission.

As stakeholder pensions have brought with them a reduction in commission, many intermediaries will be looking to PMI to make up some of the loss in income.


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