Brexit creates challenges for the UK benefits sector, but, particularly in the area of pooling, it also creates opportunities says Canada Life Group Insurance marketing director Paul Avis
There has been much made of borders in the Brexit speculation. While focus has been on the Irish border, there is a generalised desire to limit the imposition of so-called “hard” borders after the UK leaves the European Union.
From a group insurance perspective, there are two populations that employers need to worry about: those on secondment and those moved into other overseas organisations or territories.
Firstly, the good news: secondees, where they fulfil the definition, can continue to have their group risk benefits sourced from the UK. There are extra PAYE reporting responsibilities for employers, though.
‘Secondment’ describes when an employee or group of employees is temporarily assigned to work for another ‘host’ organisation, or a different part of their own organisation. On expiry of the secondment term, the employee – the ‘secondee’ – will return to their original employer. Short-term secondment varies from employer to employer and country to country. It may be less than six months but, more typically, is a secondment of between two and five years. The point is that there should be an expectation from the outset that the stay in the host location will be temporary and that generally the home country employer remains the legal employer.
This is not to say that secondment is an easy option for UK employers as not only do they have additional reporting around PAYE, they also need to consider a raft of other logistical issues such as relocation allowances and expenses, schooling, international private medical, host country tax laws and so on.
Employers will need to have a secondment agreement in place, which will set out the legal liabilities of each party and also the practical arrangements for the secondment. The agreement can be tri-partite, between secondee, employer and host organisation, or an agreement between the employer and the host organisation. While group income protection benefits can be paid in specific territories, typically those with advanced healthcare systems and where medical evidence can be gained, organisations need to think through their approach to sickness. Sometimes, repatriation of an employee and their family will be seen as the best option for them. In summary, aside from these additional, sometimes significant employer obligations, UK group insurance insurers can continue to provide full risk benefits for those on secondment.
And then the bad news: how many secondments will happen rather than simply moving employees abroad? Will an amount of people leaving the UK permanently reduce the insured UK population? This has yet to be forecast, but as an example, estimates of 35,000 – 75,000 City jobs would not materially affect the numbers of employees covered. However, if well paid roles go overseas permanently, reduced benefit amounts, and, in turn, premiums, would be a possible outcome and could be a concern for UK insurers. Many would argue that with likely skills shortages the importance of retention and attraction of staff would increase the importance of benefits market growth.
For those who become full time employees in the new country, they and their employer can broadly enjoy the same benefits package, depending on where they are, through multinational pooling. Multinational pooling provides in-country benefits with each country providing input into the overall scheme set up by a parent.
There are only 3,000 multinational pools worldwide, according to a report from Insurope UNTCAD and Dun & Bradstreet figures, but there are 100,000 multinational organisations. This risk-free area of group insurance remains significantly underpenetrated. In the UK there are 25,000 worldwide or EMEA headquarters and so the ability to discuss new pools has never been greater. Should the UK parent establish a multinational pool to continue to have risk oversight, benefits continuity, global health and wellbeing programmes, potential dividends from well-performing non-UK territories? Pooling needs to be evaluated in the new post Brexit world and corporate advisers are brilliantly placed to do this.
There could be potential for UK market growth too. Where an EU parent company has a UK subsidiary, they can invite them into their pool to make sure that in-country, UK benefits are established or maintained. EU employers could introduce their benefit profiles to new UK workforces and use pooling for all the advantages that it brings.
UK group insurance has threats and opportunities in a post-Brexit era, but international cover is one we are ready for, we have the solutions ready to go and we can continue to delight our employer customers. By being easy to do business with for those on secondment, or providing pooled solutions to deliver risk-free, global benefit programmes, UK group insurance is ready for all but the hardest Brexit.