Discussions about how to jump-start group risk and expand with new-to-market business have being going on for decades, but experts are now demonstrating much greater unanimity of thought.
One point on which there is little disagreement is that high quality group risk training is easy enough to access. Providers often offer it free to intermediaries, and the Group Risk Development (Grid) training academy launched last year is available free to provider and intermediary Grid members.
Another notable area of consensus is that the products themselves are largely fit for purpose. They are, in particular, highlighted as representing outstanding value for SMEs as a result of offering a range of added-value services that can help employers that don’t have dedicated HR professionals to manage employment policies, sickness absence or line management support. These services are getting steadily richer, with both Unum and AIG launching health apps with a virtual GP recently, and more predicted to follow.
But one caveat here is a view that products might be too complex. Last year, for example, Aviva launched its Simple Group Life, which aims to open up an audience of smaller corporate customers by explaining things in simple language.
Industrywide efforts towards simplification are also being made as part of the Access to Insurance Working Group, formed in September 2018. It has issued a research questionnaire to look into the feasibility of a simplified group income protection product.
These factors aside, another big challenge intermediaries face in growing the universe of group risk employer customers is not just making products better but communicating their benefits to employers and employees more effectively.
Recent Grid research into firms with up to 250 employees found the key challenge, cited by 52 per cent of HR professionals, was growing the business. Keeping on top of and complying with legislation – which group risk add-ons can help with – came second (42%), and recruiting and retaining good talent came third (39%). But looking after the health and wellbeing of staff was sixth (23%).
Grid spokesperson Katharine Moxham says: “It’s a vicious circle because organisations that don’t invest in attractive health and wellbeing packages tend to lose staff more regularly and therefore need to have a bigger recruitment budget to hire new ones, which prevents the funds from being invested in benefits for existing staff and long-term retention.”
It is when considering how companies can be educated in this field and how to effectively communicate group risk benefits to employees that areas of disagreement emerge. There is plenty of evidence that major providers are pulling their weight in this respect but some suggest that intermediaries could be doing more.
Howden Employee Benefits head of benefits strategy Steve Herbert says: “The things to do differently remain pretty much the same as I’ve been saying all along during my 35 years in group risk. Intermediaries need to be communicating with employees as well as employers because many employees don’t understand the products and how they work.
“So, what’s the point in having all these lovely added-value tools if no-one appreciates them. Some intermediaries say they do worksite marketing but I haven’t seen much evidence of it. Intermediaries also need to be more visible more of the time and not just be making contact at the claims stage and renewal date.”
The nub of the issue is whether intermediaries can consider it worth their while to indulge in such educational exercises in addition to the effort required to get the business on the books in the first place.
Indeed, some question whether current commission levels are sufficiently high to incentivise intermediaries to take on the education challenge – rather than taking the easy route of cross- selling to existing customers.
Part of the reason that opinions differ in this respect is that commission levels also do – from between 10 and 30 per cent. But not everyone believes even the higher levels offer sufficient incentive to go after new-to- market business.
Zurich will go up to 30 per cent commission on group life and group income protection. Zurich head of market management, corporate risk Nick Homer says: “The scale of the opportunity on paper versus the reality of being able to fill it is quite challenging without having an initial door opener. If you rock up at a trading estate you would be lucky to come away with one lead if you spent a whole day there, and then you would have to go back for at least one other visit to convert it.”
But Canada Life Group Insurance marketing director Paul Avis feels intermediaries are not even making the effort to maximise their non-group risk client banks that the rewards on offer demand. The average current premium for group risk schemes with between two and 49 lives taken out via CLASS is £2,300, on which intermediaries earn 30 per cent commission. So, they will receive average commission of £690 every year per group risk policy sold, rising to £2,070 if they sell a full suite of group life, critical illness cover and income protection.
Avis says: “We have struggled to find advisers with sufficient ambition and resources. There are thousands of pension schemes and hundreds of thousands of general insurance customers without group life, and we couldn’t have made it easier to sell and implement for relevant advisers.
“We have 10 to 20 pilot schemes underway with intermediariesatanearlystagebut are desperate to grow and pick up other partners. However, many smaller entrepreneurial specialists have been acquired by larger employee benefits consultants and, whilst the odd one has tried, the majority just seem to have been absorbed without real investment and development.”
Avis also accuses intermediaries of lacking ambition in not proactively cross-selling and upselling to existing group risk customers, even though it can take under two minutes to quote for group income protection and critical illness cover via CLASS using exactly the same data as for group life.
Towergate Health & Protection head of group risk David Williams argues that his firm has taken a number of steps to jump start its presence in the group risk market. He says: “Towergate Health & Protection has gone through a number of corporate changes during 2019. We have a very successful group risk department which now has the opportunity to expand rapidly following these company changes. We are meeting with the providers regularly to keep them informed of our plans within group risk so that they are aware of our intentions. We will be expanding through a variety of sources, both cross-selling to our existing clients and working with new clients, including those considering group risk cover for the first time.”
Tom Conner, director at specialist health and protection intermediary, Drewberry agrees that not all advisers have been apathetic about the opportunities at the smaller end of the market. “We’ve actually put a lot of time and effort into growing the group risk part of our business,” he says. “AIG has told us we are writing the highest proportion of virgin group risk business with it in the market. About 50 per cent is group life.
“For a company with two employees you could be looking at only around £100 commission but at the moment we are still doing such cases because of the potential cross-selling opportunities and because we know these companies could grow. A lot of firms are too preoccupied with instant wins but we are prepared to play a longer game.”
Williams adds: “Most competent intermediaries are aware of the shift in employee awareness about benefits. There is a growing focus on health, protection and wellbeing at work and this is driving a real interest in group risk cover.
“This interest is showing itself in two main areas. Firstly, employers with existing group risk policies in place will always be interested in how their cover can be improved or expanded, for example as insurers introduce new product features, and it is the intermediaries’ job to remain excited and vocal about these when speaking to our clients. Secondly, this increased wellbeing awareness is driving a lot of interest in new cover from smaller employers who previously only looked to protect their key staff such as directors. We work with many companies each year who are considering setting up group risk cover for their staff for the first time. Not all of them proceed immediately but they do usually jump in eventually, even if it’s a year or two later.”
Herbert believes remuneration structures need to be revisited if intermediaries are ever going to effectively penetrate the SME market.
He says: “The existing book probably pays for itself but if you’re going to grow you need to come up with something different and that basically means the industry weaning itself off regular commission and starting to charge fees for the extra work many intermediaries currently can’t afford to do.”
But Unum head of product and proposition development Ambika Fraser feels that group risk needs to be more consumer-led and customer-focused and that greater research into the SME market, particularly around buying behaviours, could be the key that unlocks the door.
She says: “At Unum we’ve definitely moved more towards customer research driving our strategy and have found that some types of insurance are not on the radar of SMEs. Tangible benefits like cash plans and dental came out as their most popular health choices, and perks like memberships and retail discounts came out top overall. So, this April we introduced tangible perks like free coffees and cinema tickets to all group risk customers.”
Others are pinning hopes on industrywide initiatives around insurance generally, such as the work looking at insurance for people with disabilities being carried out by the Access to Insurance Working Group and the investigation into the barriers to selling insurance to SMEs being conducted by the Chartered Insurance Institute (CII).
Moxham says: “Access to Insurance is the big catalyst and will continue to be so. I’m hugely optimistic about progress over the next 12 months and expect the 2021 Group Watch figures to show a quantum leap forward.”