Speaking at a seminar in Madrid today, Crook set out the challenging market dynamics facing GIP providers, who have seen the cost of delivering GIP benefits go up by 15 per cent since 2009, while average rates have fallen by 20 per cent.
He said that changes in state ESA and WRAC benefits, state pension age changes, the ageing workforce and a rise in mental health awareness had all added pressure on costs.
He also warned that some new market entrants were pricing schemes in certain market segments at levels they do not know are unsustainable because they do not have the morbidity data to price schemes properly.
He also challenged the trend towards limited term, arguing that it was originally introduced as an entry-level benefit, not a cost-cutting strategy. He said 27 per cent of Canada Life’s claims are in payment for more than 5 years and that 71 per cent of the insurer’s claims costs come from these claims.
Crook argued advisers needed to focus on the cost savings in terms of unpaid sick pay, presenteeism, motivation and engagement, and needed to promote services that target absence management and productivity, such as early intervention services, second medical opinion services such as Best Doctors – available through Canada Life GIP schemes, and employee assistance plans, ahead of the income protection insurance itself.
Best Doctors European client director David Marcus, also speaking at the event, pointed to the prevalence of misdiagnosis across the population, citing figures from the Mayo Clinic that showed 26 per cent of diagnoses were found to be incorrect, while 10 per cent of patients hospitalised in the EU experiences a medical error and/or adverse healthcare event.
Also presenting at the event, Canada Life group income protection proposition manager Scott Rayner cited figures showing that since the insurer had introduced early intervention pathways in 2014, the percentage of mental health absences had reduced by a third across like-for-like populations.
Crook said: “My fear is there is not a lot of morbidity data out there. There is data on mortality, but not on morbidity. We have assessed 30,000 claims over the last few decades. So we know how long people going to be off work. I worry that some providers who have not been in the market as long as us are pricing at a rate that is not sustainable. This is a challenge for the income protection market.
“Limited term was developed as a first step into IP before expanding out to state pension age. It wasn’t introduced to save money. There are other ways to save money – absence savings through engaging with the product.
“Every business owner in the country will say ‘our people are our greatest asset’. Those that really mean it will make sure they get it.
“I want return on investment figures to get through to the employers. That conversation, with us and the adviser, in the room, is cracking the difference between broking and consulting. 99 per cent of the time that leaves the client very happy with their adviser.”
The provider presented a case study of an employer paying an annual premium of £700,000 where another insurer which did not have early intervention services had offered cover for £100,000 less. Canada Life said it’s EIS got staff back to work sooner, saving 1,682 days of absence, a salary saving of £256,000.
Rayner said: “We asked them to trust us that we would save them that £100,000 in sick pay and we ended up saving £256,000 in reduced sick pay, before taking into account presenteeism and staff retention. So actually, they spent a net £451k on the salary insurance. So we reduced a premium of over £700k to a net spend of £451k when you take into account the sick pay savings, the value of the EAP and Best Doctors.”
Marcus said: “Most people will encounter at least one diagnostic error in their lifetime, sometimes with severe consequences for their physical and mental health. Our interventions lead to a change of diagnosis 16 per cent of times and a change of treatment in 36 per cent of occasions.
“But it need not be life-threatening issues like cancer. Take migraines for example. One in seven people suffer migraines, costing the nation £2bn a year, with 25 million days from work or school, according to The Migraine Trust. Migraine or chronic headache has been found to be the second most frequently identified cause of short-term absence for non-manual employees. When we intervene in this area, 8 per cent of cases go to neurology, 10 per cent of times get a change in diagnosis and 20 per cent of times there is a change in treatment. Second medical opinion services can really help combat presenteeism.”