Over an extended number of years it has always been my experience that the level of service from group risk providers is almost universally poor. I have never understood why the FSA or providers in the market have not acted to address this. One recent study suggested the average FSA fine imposed on individuals during 2009 was £70,000. Combine this with the regulator’s recent statements that they intend to increase penalties as a way of meeting their additional revenue requirements, and the obligation under ICOB for insurers to notify systemic failures, which as far as I am aware no such provider has done, and there is clear evidence that some designated individuals within such organisations are leaving themselves massively exposed. If the regulator wishes to increase their revenue from imposing financial penalties, they really need look no further than the group risk community where it would be akin to shooting fish in a barrel.
Ironically much of the technology which could radically transform this sector already exists. As we enter the second decade of the 21st century, does it really still make sense for insurers to receive large amounts of information on paper, where other parts of the industry extracts the same information directly on a monthly basis? Twice in recent years my own organisation carried out detailed analysis of adviser requirements in this sector. There is no shortage of evidence about what advisers want and the benefits such changes could bring. Sadly it is all too clear that the provider community simply does not wish to listen.
Extracting data directly from employers’ payroll records has become the standard method for most providers to establish and maintain group pension schemes. Leavers and joiners can also be easily accommodated through such mechanisms. For obvious reasons, employers’ payroll data is an easily accessible up-to-date source of information. If group pension scheme providers can manage such operations on a monthly basis, why can’t a group risk provider do the same once a year? Such processes enable more accurate and more timely data to be maintained for a fraction of the cost of using paper. That group risk providers have not embraced such opportunities is a damning indictment of the extent of their apathy.
To me the big question is will the newcomers finally force any of the sleeping giants, who currently benefit from the lion’s share of such business, to finally deliver a 21st-century service?
Even Canada Life, which until recently has been the only people trying to make good use of technology in this sector, could further improve their proposition in many ways through the use of payroll data. It is encouraging to see new entrants like Ellipse promising to capitalise upon the e-commerce opportunity; I hope to have the opportunity to kick the tyres of their proposition shortly. To me the big question is will the newcomers finally force any of the sleeping giants, who currently benefit from the lion’s share of such business, to finally wake up to their responsibilities to deliver 21st-century service?
My own inclination is probably not – such would appear to be the state of malaise amongst the group risk community that it is more likely that this market will be stimulated by the increasing range of corporate benefit propositions on which many major pension providers are spending vast amounts. Must we see a massive loss of market share or an enormous regulatory fine to catalyse change? Given the size of the protection gap in the UK, and the economies that can be achieved via group risk, there must be an enormous opportunity here, so why are insurers consistently failing to deliver?
The simple fact is consumers and advisers deserve vastly better service and propositions from insurers in this area. It is time for the group risk market to cast aside the quill pen and parchment and start implementing many of the obvious solutions that could achieve vast savings for their customers and their own businesses.