The Covid-19 pandemic has brought home to employers and employees the true value of group risk insurance, both in terms of the core insurance and associated health and wellbeing benefits.
For many years raising awareness of the benefits of group risk, particularly among businesses that do not offer group life or income protection as a standard employee benefit, has been a tough challenge.
But the health crisis has brought these issue to the fore. Death in service cover grabbed headlines, with the news that the Prime Minister was introducing £60,000 of life insurance for NHS workers, many of whom no longer had this benefit after opting out of the pension scheme.
Meanwhile, the Chancellor of the Exchequer, Rishi Sunak, spoke of a state-sponsored income protection, when extending the furlough scheme to self-employed workers. Never before, in living memory, have income protection and life cover received such a high profile.
The fact that the government has pledged to cover 80 per cent of salary for much of the workforce, up to £2,500 a month will have underlined the fact that state support falls far short of this ordinarily.
Cavendish Ware associate director Roy McLoughlin says this opens up an “opportunity” for the group risk industry, particularly in the SME market, which has far lower levels of group risk cover.
Latest figures from Swiss Re show that 9.9m people are currently covered under group life assurance policies, 2.6m under GIP policies and 610,045 under group CI policies. However given there are around 28m employees in the UK, there is clearly scope to extend this coverage. McLoughlin says this particularly applies to the SME market, where many businesses do not currently have this cover.
McLoughlin says: “I was amazed to hear the Chancellor talking about income protection at the dispatch box. It created a unique opportunity to talk to clients and prospective clients about this cover.”
McLoughlin reports seeing a raft of enquiries from SMEs in the wake of the crisis, particularly regarding group life.
“In most cases these are businesses we have spoken to in the past about group risk. They might not have bought at the time, but the seed was planted, and the current circumstances have made them realise that they could do with this cover after all.”
Temporary furlough schemes offer support at present, he says. But this may lead people to enquire what they would have to live on if they were unable to work for a period of time due to ill health.
In terms of the products available, group life has provided the most immediate benefit for employers in the wake of the Covid crisis, with the payments of death claims rising.
Aon principal Mark Witte says that the current crisis is likely to have far reaching effects on the group risk industry. “Covid-19 has magnified many of the existing people risk challenges facing employers today, and will undoubtedly act as a catalyst and an accelerator for change.”
He adds that it is not just core insurance benefits, but the range of additional support services that will be key to encouraging more employers to offer this benefit.
Witte says: “Employee wellbeing and resilience has been to the fore since day one of this crisis and its surge up the corporate agenda will continue.
“Issues such as anxiety, bereavement, unhealthy behaviours and financial wellbeing to name but a few will all be brought into sharp focus. The value of core services or especially the add-on services available from all group insurers should be embraced by more and more employers.”
Many of these added value support services – such as from employee assistance programmes, mental health apps and helplines, fitness programmes, second medical opinions, legal advice and rewards programmes have been available for a number of years.
More recently these have been augmented by virtual GP services, which a number of providers have added to their benefits proposition during the Covid crisis for no extra charge.
Gallagher head of distribution and sales, health and protection Steven Thomson says that many of these add-on services have been under-utilised historically, and there have been issues with employer communication and employee engagement with such services.
The recent pandemic changed this though. At the start of the crisis many consultants worked with employers to promote these benefits more widely to staff, particularly those supporting mental health and offering access to GPs, at a time when it was often difficult to access primary healthcare.
EB consultants expect such services will continue be valued more highly, and used more widely in the post-lockdown ‘new normal’ workplace.
Thomson explains: “We are likely to see an increased focus on working from home, so benefits must be flexible and accessed remotely. Issues like fitness, health and nutrition will be important to ensure a more remote workforce is staying healthy and working productively.”
LEBC director of public policy Kay Ingram agrees that added value services will be viewed as an increasingly important part of any group risk proposition.
“The value of ancillary benefits, early intervention and a preventative approach to long term absence, together with employee assistance programmes and financial wellbeing enable employees to cope with the extra pressures and to remain productive. “These benefits are often seen to be secondary to the cost of cover but should in future receive more attention as a positive employee benefit.”
Ingram says consultants have a role to play in ensuring the value of these services are properly taken into account when recommending group risk products: “While shopping around and active rebroking can reduce the cost of cover for employers the key test is overall value for money provided to the business and its employees.” But while the Covid crisis has opened up the debate about the protection gap in the UK — and demonstrated the value of this core insurance product, plus associated benefits — growing the market remains an uphill challenge according to many in the industry.
Avis says no-one should underestimate the scale of this task. “In recent years growth has come from extending the number of employees covered on scheme, and increasing premiums. The key now is to extend this to employers who do not have this cover at all.” But what strategies can be effective when trying to market group risk to the SME market? And will these change in wake of the Covid crisis?
Legal & General distribution director, group protection Colin Fitzgerald says: “If the pandemic has opened anyone’s eyes to risk, it’s probably the 5.9m SME owners and managers in the UK, who can’t summon the same kind of financial back-up as their larger counterparts.”
He points out that these businesses are more likely to recognise the value-added aspects of group risk, particularly the various wellbeing services. “Unfortunately the industry has been less focused on promoting the preventative healthcare aspects and focuses instead on claims statistics and payment rates.” This may not be helping sell the product to the SME market, he says, who are less likely to make a claim. Instead there should be more of a focus on ‘keeping people well’ and the day-to-day value created by the full range of services available.
As a consultant Thomson says he is largely working with this SME market and companies that are looking to insure less than 100 lives. He says the recent pandemic has causes some changes, but the picture is “very mixed”. “Some businesses really get it. Often it’s because they’ve been affected in some way by the pandemic, with a member of staff or family or friends falling ill.”
However many companies haven’t been as directly hit by the virus, although they may be feeling the economic fallout of the lockdown.
“There can still be the same ‘it won’t happen to me’ mentality and usual objections regarding cost.”
McLoughlin says there needs to be a paradigm shift in the way these policies are sold. More smaller IFAs should discuss group risk alongside the pension, investment and individual insurances products sold to directors and small business owners.
At the same time he says larger employee benefit organisations need to widen their reach, not focus solely on companies with 100 employees or more.
Many consultants say the key to tackling the SME market is to talk to managing directors, financial directors and human resources directors about their own circumstances, and how they would survive financially if on long- term sick leave.
Consultants say this can open a wider discussion which can include prevention and early intervention services — as well as the role these benefits can play in helping smaller companies attract and retain talent.
However, while few in the industry would argue that group risk offers a value for money proposition, the fact remains many businesses have been hard hit by the Covid crisis, and are reluctant to increase spending on staff benefits at this time.
This may be an obvious brake on potential new sales, and could in some cases effect renewals. Witte says: “Many employers will be unable to look towards new investment for some time. More likely, employers will be looking to reduce their cost base, to improve liquidity in the short term or build a more stable sustainable programme for the future.”
He says he hopes to see some flexibility from providers around this issue, to enable to them to support clients. Not only will this protect the existing market, but leave all better placed for growth again in the future, he says, when the economy recovers.
Ingram agree many companies will be reviewing costs. “Those providers which have produced additional support for employers such as advice on working from home and avoiding muscular skeletal problems, will be seen to have added value. Other providers which have not responded to the emergency needs of businesses may find it harder to complete renewals.”
Thomson points out that increased spend on group risk and employee benefits may be difficult to justify at a time when other insurance costs paid by small businesses — such as business interruption — are increasing, in part due to the high number of Covid claims.
He says: “The lockdown has had a huge impact on many businesses. The full impact has yet to be seen, and may not be apparent until quarter three of this year, or even into the start of 2021. “As a result many businesses will be reluctant to spend more on staff benefits, even if they can see the benefit of these products and how it could help them future proof their business as the UK begins be is hit with a second coronavirus wave.”
The Covid crisis has helped demonstrate the real value and return on investment provided by group risk products. But these exceptional circumstances have also limited some businesses ability to increase spending on this benefit. The challenge for the industry will be to continue to evidence these benefits as the economy moves onto firmer footings.
