Show the need to see the return

Group income protection has always struggled to find a place in the psyche of both employers and employees in the nation’s companies. But that, said delegates at the recent Corporate Adviser industry forum Growing the Group Risk Market – the Role of Technology, does not mean targeted marketing messages cannot force awareness of the benefits of GIP, or the full range of group risk products and services.

Communicating even simple basic messages that challenge the well-worn misconceptions of senior managers and HR and finance directors can help grow the market, argued Karen Gamble, director health and wellbeing, Health Lambert Employee Benefits, who gave as an example the common misconception among employers and employees that income protection is seen as a little bit elitist.

“We need to highlight the whole benefit and the return on investment and be able to justify and demonstrate that”

“They think it’s for the top bods, those who have been in the company for five years or more, whereas in fact it is most valuable to the lower or middle range staff. One could argue the very lowest ones could be covered by the state provision more proportionately than the middle ones. But that is around £400 a month. It’s not a lot.”

But for all the potential drivers of market growth, the age-old hurdles of inertia, ignorance and austerity will always act as a drag on distribution.

As David Dolding, head of consulting at Lorica Consulting said, the challenge from the outset is that it is always difficult to explain to prospective employer clients what the benefits are of having income protection, good occupational health (OH) and good absence management processes.

“They are always reluctant to invest. Ultimately you can get income protection within the package you recommend. But the difficulty is how to get that message across without it sounding like we are just trying to sell them another product. We need to highlight the whole benefit and the return on investment and be able to justify and demonstrate that,” said Dolding.

Carl Chapman, consultant at Bluefin agreed with other delegates that the small to medium business (SME) market is where the focus needs to be. “Just one in six employers in the private sector have some form of protection insurance that is a very low number and most of those will be in the SME sector.”

Underlying every challenge are two constants for advisers: cost and education, and the current climate really doesn’t help either. As Chris Ford, director of group risk for Jelf Group pointed out, Britain plc is struggling, state benefits won’t provide, and welfare reform is coming. While this should fuel demand, the money to meet that fresh demand remains scarce.

“One in 30 of the working population are claiming long term sickness benefit from a system that is going to tighten and harden and go to any occupation basis and strict assessments, just to get £4,000 a year,” says Ford. “But the perception of those individual employees at home is that the State will look after them, and if not the State then their employer. Or they think they will fall back on some investments and savings, which will probably run out in three months, if that person is disabled to the point where they can’t return to work.”

The focus has to be on education, he argues, because the income protection benefit has a value way above the insured benefit.

But Gamble pointed out that while all these factors are at play, employers are also gearing up for a 3 per cent hit on their payroll costs from auto enrolment. “So they are resistant because they don’t have the budget to cover income protection as well,” she said.

“Just one in six employers in the private sector have some form of protection insurance – that is a very low number and most of those will be in the SME sector”

Perhaps the answer therefore is not to ’sell’ income protection. Paul Avis, sales and marketing director at Canada Life Group Insurance says one approach would be to market a solution, where income protection becomes the end piece for those that genuinely need it.

“So rather than presenting a product and saying you must buy it and then all the luxury arguments and the budget coming into play it doesn’t have to be sold like that.”

Dolding agrees, citing the example of his approach to a large portfolio of medical clients who don’t have income protection. “We have been targeting them not just with an income protection product but with lots of other bits and pieces that they can tack on, such as employee assistance programmes (EAPs). So we are selling a whole raft of services, on the back of which they get income protection.”

Dolding said the approach has worked proportionately more effectively for SME prospects than mid to large corporates, by focusing on the wider add-ons and not just the bottom line cost, by pitching executives with the message that if they offer these benefits to the rest of staff they also get the EAP, OH and other extras.

There is also an opportunity to market group income protection to smaller employers who own their premises as a solution that will not just look after staff’s long-term income needs, but potentially the underlying business as well.

“You have got to align income protection with pensions,” said Avis. “It is not uncommon for five directors to set up a Sipp with their business in it. Imagine that the top earner is on £100,000 a year and he has £500,000 invested in that building. If he then dies or has to take his pension early, he will need his stake back straight away is the bank going to lend the remaining directors the finance to cover off his share invested in the building? With income protection in place and the benefits aligned to the pension scheme they can cover off the risk. This is the sort of technical education advisers have to present to clients.”

It is well understood amongst advisers that whatever corporate package is in place, the risk of a one size fits all approach may backfire on the employer. For this the solution according to Chapman is flexible benefits, and if the employee does not end up using it, then at least the employer can show he has made a real effort to support his staff.

“Flex to me is the final solution to this whole problem,” he said. “There needs to be education to go with flex so that people can make the right choices as to what is most suitable for them. There are arguments that flex is quite expensive from the employers’ point of view. Even if you are maximising salary sacrifice, people still don’t utilise their options. I accept if you can’t get the workforce to engage even with flex then it defaults back to the employer to tailor the benefits to the different life stages of the employee. But the employer could equally argue that they have put everything there for their staff and have communicated it all, if the employee still won’t help themselves then the employer can’t hold their hand all the time.”

Advisers understand all too well the frustration of and also the necessity of repeating to employees over and over again the message of what benefits they have. What the advisers also appreciate is how the right level of service from the insurance provider can make their job much easier.
Gamble argued it can be quite simple: “Once I know what the employer wants and what he can afford, then I want the relationship with my insurance provider to kick in. I want someone I can speak to who can get me the right terms and at a cost the employer can afford.

“Flex to me is the final solution. There needs to be education to go with flex so that people can make the right choices”

“Then I will facilitate the appointment for the insurer to send in its consultants to go and talk to the employees. They can up sell to them individually if the employees are interested. But I have shifted the regulatory cost off my base and the employees are getting some financial education as to what they have in place and what else they may want to suit their own individual circumstances. And all this frees my time to concentrate on the employer as the client.”

No adviser thinks it is going to be easy to grow the group risk market especially in a time of straightened finances. Underlying forays to find new business in the SME market and bring new clients to the market will have to be strong: effective educational messages will need to emphasise the solution and not the product.