Traditionally group protection and its individually-advised counterpart have been worlds apart, with corporate plans having entirely different underwriting processes and pricing to retail cover.
But as employers look to get ‘more for less’ as we emerge from the Covid-19 crisis, and employees seek greater personalisation and choice when it comes to their benefits, is there an opportunity to take the best elements of group and individual protection to develop a proposition that can give employees more?
The potential for a group/retail hybrid, delivered through the workplace, was one of the topics discussed in a recent online debate held by Corporate Adviser.
Panellists debated the vastly different cost of manufacture between group and individual protection products, and the potential for a hybrid approach, delivered through the workplace, to return some of this to the customer through cost. Compared to the individual market, group schemes are considerably cheaper.
Howden Employee Benefits senior risk consultant and new chair of Group Risk Development Paul White said: “The costs inherent in individual protection are so much more cumbersome and expensive than they are in group. The underlying process is a lot more complicated. Even if you think about flex plans, because of our bulk buying power, because of the client sitting behind the process, buying, covering the group market is simpler and cheaper.
I’m not saying it can’t be even more simple and even cheaper, but if you make that comparison between the retail market and the corporate market, the corporate market wins hands down in terms of efficiency already and in terms of minimising the amount of requirements that you need to go through to get cover.”
Legal & General has already moved on this opportunity. In December, in partnership with Salary Finance, it launched Protect, a digital group insurance proposition that enables employees to dial cover up or down across group life, income protection and critical illness and buy extra cover on a voluntary basis, with an online process that is significantly quicker than buying direct.
Legal & General distribution director, group protection Colin Fitzgerald said: “The Protect product we launched last December brings together both the expertise of Legal & General from a retail perspective and the accessibility of the easy access of a group environment and brings the two things together with mobile-enabled technology, which is specifically designed to reach the man on the street and indeed potentially the member of staff not covered.
“So it’s technology in the administration of the scheme, and technology in the engagement with the individual that we’re looking to improve.”
Consultants and advisers at the event debated the fast-evolving job market, with the growth of the gig economy and the increasingly rapid turnover of employees. This, said advisers, made portable protection products a more attractive option.
Benefex head of corporate benefits Stephen Hackett argued that going down the track of portability was a big step towards a more individual approach, which brought with it selection risk.
White took the point further, adding: “If you take that concept of portability, we’re talking about potentially a hybrid group retail product, which some of the constraints that the insurance companies work under don’t necessarily allow. Would this be truly portable? And what does that mean? Is that a continuation of an individual policy or of a group policy?”
Or is it something inbetween? Delegates discussed the potential strength of the public message that ‘you can get life cover considerably more cheaply through your employer than direct’ – and the potential ramifications of such an approach.
Fitzgerald said: “We have a hybrid product here. The pricing of that product is actually heavily influenced by group.
So the top up rates are actually short term, top up rates in-year. So you’re not paying a retail price. The portability quite clearly would have to be an individual product going forward.
“A lot of employers don’t cover substantial groups of employees, which takes us to the inclusive access issue. We also believe that the employee/employer market is ripe for and appropriate for growth because of the access that employers have.
“There’s a little bit of a strain there between retail and group. However, if we’ve got change coming, we’ve got to be aware of that change and open to the fact that people are going to be far more flexible about their careers. What we’ve got here is a way forward for now.”
The group v individual clash is a trend across the entire world of employee benefits. Speakers at the event discussed the way that outside of the group risk silo, other areas of benefits delivery are becoming increasingly tech-enabled and personalised, with potential ramifications for core benefits.
The big employee benefits consultants are all developing their own employee- facing apps which while not necessarily delivering financial advice, are designing non-advised pathways that give clear guidance across a range of an individual’s financial matters. These tools are using Big Data solutions that tap into Open Banking feeds to give an increasingly personalised experience to the employee. Delegates debated the potential for these tools to actually address the employees’ group risk needs and requirements and the way this will impact the traditional group risk sector.
White thought many of the core benefits would remain unchanged for large parts of the existing market. He said: “I think real growth will come in the wellbeing space and in the voluntary space. But the core group market hasn’t changed in 20 or 30 years. And quite frankly, I don’t expect that core product offering for that core market to substantially change in the next five or 10 years.”
Mercer insurer consulting group leader David Bourne pointed to what employers may want from the industry as we emerge from the Covid-19 crisis. He said: “What is it that the employer wants at the moment? It could be wellbeing – it might not be life assurance. And perversely, the one thing that the pandemic has done is it’s introduced the UK’s largest ever government sponsored income protection scheme in the shape of furlough.”
An alternative view is that we may see some employers wanting ‘more for less’ from their benefits strategy, and that this includes voluntary benefits.
Hackett said: “I think it’s inevitable. When you look at other models around the world, South Africa, the US, that sort of concept of modern workplace marketing, where the employer is the gateway to the individual and therefore voluntary plays a significant part, works really well.
“There’s been a shift in their thinking so that the employer is starting to withdraw core benefits, as we call them, and build more of a value message around the voluntary benefits that they provide. In the UK, we’re caught between the two. We have some pretty generous core benefits – the pension base, which is compulsory. There are a number of
voluntary products that really do support wellbeing strategies really well, but you don’t often see that communicated well. And a lot of us are in the same place – we’ve got broking capabilities, we’vegot consulting capabilities, comms, tech, and the rest. But actually the bit that is missing is that communication, engagement, that user experience, particularly with voluntary benefits. I’m convinced they will grow as we come out of the pandemic.”
If a hybrid approach can bring the efficiencies and economies of scale to millions of workers, with streamlined processes that reduce sales process friction, we could just start to see more people getting more of the cover they want.