This October’s introduction of the Welfare Reform Act, the arrival of personal accounts in 2012 and the continued fallout from the age discrimination debate will all mould the environment in which consultants operate. Most GRAF delegates saw positive outcomes from the changes. Advisers also had a few ideas of their own as to how Government could shape the market to encourage employers to take public responsibilities into the private sector.
One innovative idea that Katharine Moxham, consulting director, health & risk at JLT Benefit Solutions would like to see is the philosophy that allows contracting out of state second pension extended to the group income protection market. She argued that with state provision likely to extend to 28 weeks of statutory sick pay and a further 13 weeks of looking to getting people back to work, employers are likely to be duplicating cover through the private sector.
Moxham believes that group risk has been the poor relation to other forms of benefit for too long. “When it comes to legislation group risk is often an afterthought. Legislation is usually built around other issues. Employers are effectively paying once through their income protection policy and once through their National Insurance Contributions. Why should that be?” she says. “Why should these employers who insure against sickness benefit be allowed to contract out of the state provision of long term disability benefit? This could be an attractive incentive to attract employers to group income protection products.”
When it comes to ongoing legislative changes, advisers were generally positive about what effect they would have on their businesses. Dan Lamb, head of group risk at Jelf Group remains to be convinced over whether the government’s aims behind its Welfare Reform Act will be achieved, but feels the exercise gives consultants a perfect excuse to talk to clients about what they have in place. “It is up to us to raise the profile of welfare reform, but how successful this new concept will be at getting people back to work is yet to be seen. However, this is definitely an opportunity for us to talk to clients about product design.”
Rick Wilkinson, healthcare and risk consultant at Watson Wyatt agreed. He said: “The Welfare Reform Act is if nothing else going to be a catalyst for change, because it will force employers to look at their IP offering. Many companies may well stay as they are, but this is a great opportunity for us to get a foot in the door. If you can’t speak to them now, when can you?”
A poll of advisers found two thirds saw welfare reform boosting their business, with the remainder seeing it stay the same. None saw negative consequences from the change.
Advisers were unanimously of the view that the arrival of personal accounts will have no affect on their business at all, even though employers are likely to see their pension costs soar as auto-enrolment boosts participation rates. Despite this forced upswing in pension spending, GRAF delegates think there will be no consequent reduction in the group risk spending of employers to pay for this.
Guy Roberts, director of Portus Consulting said. ” The proposed 3 per cent is not sustainable, this will have to go up in the future. But this won’t be a problem for employers with decent pension schemes.”
Lamb also questioned how wide the breadth of take-up would be . “Employees can still opt out of Personal Accounts, if the organisation gives out the message of pay rises against Personal Accounts, although this is of course illegal,” he said.
There was more muted concern over age discrimination. “Age discrimination costs will make many employers wary of legislation,” said Correia. While two-thirds said it was having no effect, 13 per cent of delegates felt age discrimination legislation is reducing their business volumes.
Legislative and regulatory change has been the stock in trade of the employee benefits consultant since the dawn of the profession. Today’s intermediaries see opportunities, not challenges, from the new laws currently in the pipeline.