UNTIL RELATIVELY recently the phrase ’group risk e-commerce’ was almost an oxymoron, and while there have been sterling efforts on the part of a small number of insurers, overall it’s fair to say that this sector still lags behind the rest of the financial services industry. It is hard not to find this ironic given the huge success that e-commerce has achieved in both the individual protection and group pensions markets. There are a number of insurers sitting on the vast majority of the technology they would need to make a dramatic difference in this area but have yet to do so.
Around the market I hear many players, especially those who don’t have technology, protest that there is no demand amongst the adviser community. My experience is that this is anything but the case. In conducting this research we spoke to a wide range of adviser firms engaged in this sector and the call for better technology was unanimous. RDR is driving an unparalleled focus on efficiency within adviser firms, and as organisations embrace technology as an economic necessity its absence will become all the more conspicuous.
This same message has been emphasised by those major distributor firms engaged with the F&TRC Workplace Forum, where it was recently explicitly identified that many group risk providers’ processes are inadequate for the current marketplace. While those insurers that participated in this study are all clearly making major investment in the necessary solutions to automate the market, it is clear others need to address
their shortcomings.
With the advent of consultancy charging, group risk offers a valuable opportunity for advisory firms to achieve significant additional income. At the same time auto-enrolment looks destined to create an increasingly competitive market in the pensions arena, and the need for automated processes to ensure employers’ full compliance with the pension regulators requirements, will result in a situation where the majority of data necessary to populate electronic group risk systems should be readily available. There is a major opportunity at this time for organisations building new systems to include not only the data for pension contributions, but to supplement these with the additional requirements to automate group risk.
The rapidly evolving workplace platform market represents further reason for creating e-commerce services. Perhaps in the fastest growing area of the corporate benefits environment such platforms are built on a core principle of using technology to reduce cost and improve customer service. Clearly without the services measured by this study any group risk insurer is unlikely to be able to capitalise on this opportunity.
It should also be said that those organisations that continue to operate byzantine paper processes in the group risk market are virtually offering an open invitation to the FSA to sanction them for breaches of treating customers fairly and lack of adequate systems and controls. Personally I am amazed that the group risk market has managed to avoid such regulatory exposure to date, and with the increased focus from the FSA on
aggressive regulatory intervention it can surely only be a matter of time before it takes a major scalp in the group risk arena. Does not this risk alone justify urgent investment by the laggards?
As identified by the survey, those providers who have made the effort to build the systems needed to achieve 21st-century efficiency are putting themselves in a position to achieve a clear market advantage. Any group risk insurer that doesn’t invest in similar technology is likely to find themselves becoming increasingly uncompetitive in the near future. Hopefully the detailed benchmarking provided by this report will help with
business cases within those insurers who have yet to make equivalent investments. Should they need further evidence, we have considerable additional information collated during the research process and we will be happy to show them in detail the work they need to do to progress.
By the time we conduct the 2012 Group Risk e-Excellence research I fully expect it to be the case that the absence of an e-commerce proposition will be tantamount to a provider announcing that they are intending to exit the market. Perhaps this survey can act as a wake-up call to those insurers.