Inertia: resistance or disinclination to motion, action, or change. “What’s the problem with inertia?” I hear you say. After all it is what keeps the client renewing with that same old policy and not expecting any great amount of work from you or me. In fact one could argue that client inertia is what keeps the whole business of broking insurance policies ticking over. The traditional view is that if every client changed their policy every year, there wouldn’t be the time or money to pay for all the work in either an insurer’s or broker’s business model.
What is wrong with this view? In fact, what if, as in other areas of business, inertia is the secret enemy? What if it is the sloppy thinking, the general unfitness which allows many UK businesses to do nothing other than excel at mediocrity? I realise that renewing something like a company health insurance policy is somewhat less important in many company manager’s views than servicing the photocopier, but what if you could demonstrate real savings by challenging the simple inertial renewal.
Here are three simple questions to ask which lie at a somewhat higher level than the normal TCF questions that we would all normally apply:
- Is the cover still applicable to this company?
- Is it tax efficient?
- Would the company be better off simply giving cash instead of a PMI benefit?
The first question is quite easily dealt with and I am sure all good brokers and IFAs stay in touch with their client companies and understand their needs as the company changes. For example, when the policy was first written, were there simply three employees working ferociously on a start up venture? Five years on the company is now thriving with 15 employees. Yes OK, you may well have added one or two extra onto the policy, but is full blown comprehensive cover right for a 22 year-old earning £15,000? Perhaps this is the time to look at tailoring the policy so that older, better paid staff have full PMI which they are likely to use, whilst younger staff have some kind of NHS Health Top Up policy which helps them out for common claims such as dental and optical claims and makes the NHS a far smoother ride in the very unlikely event that they need to use it. In fact with some careful tailoring, all staff can benefit from a policy which is suited exactly to their needs.
The second question often has the average broker or IFA running for the hills! Far too complex, far too tricky! Something best left to the big employee benefit consultants. Well this is OK, as long as you don’t mind losing your bigger groups to a competitor who may just be a bit more savvy than you. But here’s the trick. None of this is hard, and a simple phone call to any good insurer will often lead to some huge reductions in cost for companies with over 200 employees. For example, here at WPA, we have long been forging a business out of converting large insured groups into Corporate Healthcare Trusts (CHTs). This has the added bonus of confronting a company with the first question and making sure all the benefits fit all categories of staff.
In physics, no one quite understands what causes inertia. In business the reason is all too apparent. Simply lazy management and perhaps lazy advice
However, a CHT is not right for every company, particularly those with a claims fund of less than £1 million. Until recently, there wasn’t much more that you could do short of reducing benefits. However, a Corporate Deductible arrangement whereby a company can pay a group excess which normally represents the notional claims fund can be an efficient solution. IPT is only charged on the insurance premium and administration charge as for any normal high deductible insurance contract. From the company’s point of view, there is no real change as the administration fee covers the cost of administering the claims through the deductible. Should IPT rise in future Budgets, this may become a seriously attractive proposition for slightly larger groups.
The final question is one that should always be asked although it may cause some discomfort to you if you make your living from selling corporate healthcare. Why does the client company buy PMI? What benefit does it derive? Would the company be better off simply increasing employee’s salaries by the value of the premium and setting up a decent voluntary scheme?
In physics, no one quite understands what causes inertia. In business the reason is all too apparent. Simply lazy management and perhaps lazy advice. Asking these three questions should go some way to allowing a company to accelerate in a more positive direction.