The income protection industry needs to do more to get its message across to employees and employers if the market is to grow further. That was the view expressed by delegates at last month’s industry forum on long-term disability risk.
Delegates said the industry needs to come up with creative ways to convey the message to both employers and employees as to how much risk they are carrying in their workforces and personal lives if they do not insure their income.
Part of the problem is the perception that many of the risks likely to be claimed on are not worth insuring. Carlos Correia, LCP senior consultant, said: “People can understand they may get struck down by cancer, but they never imagine they will be the one who will be signed off work with depression, unable to go into the office because of anxiety, or some back problem. So they can buy critical illness, but long-term sickness protection to cover arthritis? They say ’I’ll just work through it’. People don’t understand how likely it is to affect them.”
Forum delegates argued the shift in emphasis towards employee responsibility means it is more important to get the message to them as well as employers. Delegates also suggest that campaigns need to be hard hitting rather than oblique and euphemistic.
Ellipse chief executive John Ritchie points out there is around a one in 20 to one in 15 chance that you could find yourself in a position where you will never work again. He said we need to be able to have a frank discussion about the issue including the huge potential burden it can place on families, citing the example of the robust approach taken in Australia, where individuals are seen as letting their families down if they have not insured their ability to carry on earnings.
It was suggested that the reason current TV ad campaigns had not been more hard-hitting is because advertisers do not want to turn off consumers, raising the question whether a co-ordinated campaign from an industry body such as Grid or the ABI would be able to be more hard-hitting as it would not have the same brand association concerns. It would also be less open to accusations of scaremongering.
But Ritchie said it is up to individual firms to secure budgets to get this message across rather than through smaller cross-industry initiatives. Either way, it should be hard-hitting, he argued.
Ritchie said: “Isn’t our duty to get everyone to think well about the risks? We need to turn this into something people understand. We can go for something higher minded. How do you enable people to think well about how they spend their money? Life companies haven’t communicated this well,” he said.
Delegates contrasted the way the private medical insurance sector is constantly getting a strong message across on the back of bad press coverage about the NHS with the failure of group risk to take advantage of the erosion of many state benefits and the higher thresholds for obtaining them. Correia said the group risk sector could learn from the private medical insurance industry, which, he argued, drip-feeds negative NHS stories to the press on a regular basis.
Enrich Benefits client director Paul White noted that the sickness absence review was a huge opportunity missed for the income protection industry while the PMI industry had got their message over rather better. But he suggested when you looked at the detail of what the two sectors did, it was actually the income protection sector and related services that are likely to get people back into the workforce.
Correia agreed the sickness absence review was a “terrible miss”. He said that a big legislative or taxation change could really help, but he thinks failing that in future we may see a more direct style from insurers though maybe as part of a lower-commitment approach.
White said that while there was a trend towards employee empowerment, it remains important to continue emphasising the benefit to the employer.
He said: “There is a question of return on value for the employer versus the empowerment going up with more choice of benefits. You might find return on investment going down and the employer won’t see the advantage.”
White also noted that there is a dearth of voluntary products on the market and suggested something might be done to bring group scale and terms but financed by individuals.
Thomsons Online Benefits health and wellbeing consultant David Bourne said: “With voluntary benefits, the key to persuading more people is to make them better informed, to explain it in terms of what it would mean if it wasn’t there. Saying you need protection if you lose your income means they all think IP is redundancy cover. It is better if you ask ’what is your expenditure? How long is that set to run? What if you have no salary? How long can you afford those aspects of your life?’
“Still some will say it will not happen to me. But can the industry give better education? Does it need to be government-backed?”
Several delegates suggested new approaches to growing the market might include talking to industry associations or even aggregators. Insurer might increasingly go direct and certainly in a more structured way than they do now, with delegates saying they were quite relaxed about this.
How do you enable people to think well about how they spend their money? Life companies haven’t communicated this well
Bourne said an insurer might have to offer a suite of services rather than a single product in isolation in which case they might need to work with corporate advisers anyway. However, if an insurer could go to employers and offer a means of reducing and improving absences that could work.
Pearson Jones risk benefits consultant Graham Davis added: “Anything that can grow the market is great as long as we find a way of getting a very valuable benefit into the hands of other people. Any product needs to be simple. Even if we approach whole associations, we can say for your members we can provide this geared to the individual, but paid for by the employer.”
But delegates emphasised again that it was important not to lose sight of the employer’s interests.
Bourne said: “If you can make it successful for the client, if they can see the return on the investment, clients will pay you to do it. If you design the education for the employee and that also speaks to the finance department because longer term it will reduce spending, then clients will pay you for that advice. The key to the success is the engagement of the employer and employees.”
Delegates considered how employers were incorporating group risk into an overall strategy in terms of short, medium and long-term sickness absence management but some delegates were concerned some employers did not actually understand the risk it posed to their business.
Davis said: “I don’t believe all companies actually know what sick pay actually costs them, what’s the true value. We have come across larger and smaller clients who don’t measure any form of absence at all, which must be a risk. They are recruiting people, training people, getting them in their jobs, and they can go sick with no expectation of when they will come back.”
Helm Godfrey group risk consultant Laura Brown added: “It is also a case of managing their absence when they are off sick. If they don’t manage things they will turn into a claimant.”
White said: “You need to bear in mind most of the cost isn’t long term – the vast majority is short term. People can be off ill for six months and it could be 10 per cent of the absence costs. An IP scheme is 0.5 per cent of payroll and absence cost is between 5 and 10 per cent. With a long term tail you can make a difference but it’s not where the employer’s costs are.”
However there was some discussion about whether insurers and employers needed to be aware of absence at all stages because of its impact all along the chain.
If you can make it successful for the client, if they can see the return on the investment, clients will pay you to do it. The key to the success is the engagement of the employer and employees
Ritchie said: “I think any insurer who takes the long tail of the disability risk without being involved very early in the process is a mug. You simply have to have a reliable process that delivers you people from the absence data to some sort of case management and that is very good for the long tail and pretty good for medium and short tail as well.”
Ritchie noted that employers can get it wrong in two ways, by being too soft or by bringing people back full time too quickly. He suggested that leaving things to line managers’ discretion will not work without a well-structured process being put in place.
There was also some discussion of occupational health professionals and the role of GPs and how this will not always help the employee back into work and can, in some cases, actually cut off contact, turning work colleagues into patients.
White added: “From an employer point of view, it is how you make the benefits work for you, rather than individual benefit, managing your risk, getting people back to work. It may sound trite but your employees are your biggest asset. The reality is if you get someone fit, it is more economic getting someone who knows a job back into the work place, than hiring and training someone to do this job. But actually income protection is an insurance product aimed at looking after someone when they are ill, not as a continuation of occupational sick pay. If I was defining it to a client, your income protection is what you use when you have failed to get them back to work. It is your stop gap.”
The view from delegates appeared to be that the messages that seem most trite are also the most appropriate. For most employers the workforce is the company’s biggest asset – getting them to understand the risk it holds is key to growing the GIP market.
