A year on from the meltdown of the financial system we have seen banks go bust and then be bailed out with billions of your money and mine. They have recovered enough to spark fierce debate about bankers’ bonus packages, with snouts being firmly inserted in the corporate money trough.
So they are all right but what about us – us being both UK Plc and the group risk industry?
On UK Plc it is relatively easy to answer. Unemployment is high and rising, business confidence is fragile to say the least, the stock market has crested 5,000 for the first time since last year but the outlook is still uncertain.
From a group risk perspective I think we have lived 2009 in a bubble – no not with Bubbles – that was Michael Jackson. If you look back to September last year when the real crisis began, many companies were not that quick off the mark to start paring down their headcount. But in 2009 this has clearly gained significant momentum and when you consider the group risk business model with something like circa 35 to 45 per cent of GIPI and GL schemes being renewed in the first four months of the year it is likely that a lot of the pain has not yet been felt. This is because renewals were completed before any consultation periods with employees had run their course and any hours/salary reductions been implemented.
From an insurer perspective they will likely see a reduction in API, although I have heard from one insurer who has noticed scheme size reductions of about 3 per cent so far, but the true attrition rate will not be known until 2010. The only saving grace is that one insurer has left the market which will clearly bolster the remaining insurer’s coffers, but it won’t grow the market.
As for intermediaries, the ones who work on commission will see earnings reduce and the ones who work on fees will probably find it hard to justify increases.
The age old fundamental question is what is the group risk industry going to do to attract brand new previously uninsured schemes?
There is no doubt that in the recent past the industry has made some significant changes to benefits such as free cover level, maximum salary related benefit levels, increased maximum pension fund contributions, once and done underwriting. These changes can be construed as good, but insurers are acting like lemmings. One does something innovative and class-leading and the others, by and large, immediately follow suit. These changes as significant as they are only affect the “few” who have high benefit levels.
The other changes are the inclusion of “freebies” such as EAP’s, bereavement help lines, discount shopping concessions, Best Doctors and the like, which again are good but do they really make a difference?
Once again all the “freeby” benefit changes only affect those who have income protection in the first place and I doubt very much that at this point in time it would influence any owner or director of a business to go out and buy an income protection scheme.
There are those who think that government regulation is the way forward to encourage more companies to provide income protection as a benefit. This may be an option, but there are several pitfalls to this route as I see it.
We have an election next year, so it is not going to happen (if at all) before then. I do not imagine that enforcing employers to provide income protection will be high on any new government’s agenda. As always the main focus for benefits is pensions and big changes are afoot for 2012, which will further dilute their appetite.
We have as an industry to promote ourselves and as I have always said we need to promote to the end user, the employee, so that they see the need for this benefit and the potential pitfalls if they don’t.
Awareness is key and, if it could be arranged so a character in a TV soap becomes ill and has income protection and is unable to qualify for state benefits and as a result doesn’t lose his house, car, job, integrity, and the rest, we could portray all the good and great benefits of this product, which might fire up employees and employers alike. If nothing else the storyline could convince the millions who watch “soaps” to maybe, just maybe look at their provision during illness in a different light.
Finally for good measure in another soap there could be a character who has no income protection and loses everything. After all, ITV and others want to increase their revenues by having product placement in TV programmes.