The next few years could prove to be extremely challenging for the workplace protection and healthcare sector, with insurers needing to evolve and adapt their propositions if they want to see growth continuing in this market.
This was one of the main conclusions from a recent Corporate Adviser roundtable table event on Workplace Protection and Wellbeing, held at the House of Lords.
The providers and consultants attending the event reflected on the findings of Corporate Adviser’s latest Workplace Protection and Wellbeing Report. This showed that in 2022 there had been modest growth across all product lines in the group risk sector, as well as in the cash plan and corporate healthcare market, with particularly strong growth when it comes to sales of PMI products.
However, several consultants and advisers at the event said they were concerned that future benefit spend may be squeezed, with employers facing inflationary pressures elsewhere.
Benefits squeeze
Succession Employer Benefit Solutions employee benefit consultant Tim Parker said: “There seems to be a lot more pressure on businesses to ensure surplus funds are used increase salaries. People are switching jobs for a £1,000 or £1,500 pay rise. Given the challenges around recruitment and retention it is not surprising that businesses are prioritising this ahead of benefit spend.”
Verlingue UK head of employee benefits Mark Pugh agreed such pressures could have a detrimental effect on future benefit spend. “I think we are going to see a lot of CFOs and financial directors reluctant to put new schemes in place or hitting pause on future benefit spend while they are involved in heated discussion with unions or senior management around pay increases. This is likely to be the reality for many business regardless of how compelling the story is around benefits from advisers or HR directors,” he said.
Pugh said one of the unfortunate outcomes of this may be employee benefits become less valued in the workplace. Historically, he said, there has been the view that people’s reward packages are roughly 75 per cent pay, and around 25 per cent associated benefits — be it pensions, holidays or healthcare and protection. benefits. “I just wonder over the last few years whether this is still true. Even though we’re all passionate about benefits and the value we think they can add to a total reward package, if the employer is not evidencing the value of this investment to their employees, that 25 per cent gets eroded.”
This can become a viscious circle: if employers do not evidence or invest in benefits, these are valued less by employees, which can lead to employers further cutting back on benefit spend.
Wellbeing call
Benefex head of group risk Chris Read disagreed that the conversation with employers was all about pay. He said in recent years he’d seen an increased expectations from employees around wellbeing. “The demand nowadays is that employees want their employer to look after them. The first thing many will ask when joining a company is ‘can I work from home?’ and ‘what services will you provide if I’m unwell?’ Pay is of course important, but for an extra £500 might make a big difference for a lower paid younger employee, yet it may be less of a big deal for someone on a larger salary and the benefit discussion is still important here.”
Consultants said that despite a focus on pay, the benefits market was also being underpinned by ongoing problems in the NHS.
PIB Employee Benefits head of healthcare risk and technology Clare Dare recognised the financial challenges faced by many companies. “But we are also hearing many of them ask ‘how do we become a good employer’. We are hearing this from both SMEs and large corporates particularly in relation to recruitment and retention issues.”
She said that benefits have a role to play when it comes to squaring this circle. This doesn’t have to be about spending more money she said. “A lot of the work we’ve been doing is around that value proposition, what do you have, and why do you have it.”
In a similar vein Beckett Financial Services employee benefit director Tracey Gloyne said there has been a renewed focus on total rewards statements, as a means of demonstrating to employees the value of benefits already in place.
The advisers and consultants at the debate agreed with the findings of the report, and said their experience was of growth across the sector. Many commented they had put in place new schemes for firms that had not had group risk or PMI benefits before, particularly in the SME market. But many questioned whether this was sustainable without renewed focus on the value of these benefits.
PMI growth
MEC managing director Ian Holmes said: “My concern is that there will be many in the industry who simply sit back and say ‘aren’t we brilliant’ because the market is growing with a lot of virgin business, particularly from SMEs. But the fact is we are not doing anything to grow the market; it’s only growing because at the NHS is so poor.”
This growth could come to an abrupt end, Holmes warned, particularly with significant premium increases in the pipeline. Many of the consultants at the event expressed concern that while conversations around benefit spend were tricky at present, they could get significantly more difficult over the next few years, with premiums expected to increase across most product lines.
Sustainable pricing?
Gallagher lead consultant, risk and healthcare Anders Lewis said this was certainly the case in the corporate PMI market. He said the major insurers, who were notoriously reluctant to talk about such issues, were all starting to flag up future price increases. “They are putting it out front and centre and trying to get ahead of the curve on this.” He said an increased number of claims and significant medical inflation, on top of normal inflation which was pushing up labour and other costs, meant price rises were inevitable. “For many of these new clients this will be a shock at renewal, the premium increases could be quite painful.”
This general trend has been further exacerbated, particularly in the group risk sector, by insurers looking to boost market share by competing on price. Holmes says: “This has always gone on. Insurers, particularly some of the smaller ones, might offer cheaper premiums to attract new business in through the front door.”
This can be seen in the Workplace Protection & Wellbeing Report’s tables showing the relative market share of the leading group risk providers across different product lines, with some of the strongest growth coming from smaller providers. Advisers said that part of the challenge they face is ensuring they communicate to clients whether these prices are sustainable over the longer term.
Holmes added: “The problem is that insurers are reducing premiums to grow their market share, but none of them have sufficient resources to administer their book of business properly.” He said there are significant delays, particularly in the PMI market, when it comes to making claims and processing renewals.
Service challenges
Other consultants agreed that most insurers had struggled to maintain service standards post-pandemic, and did not always have adequate resources to service a growing number of clients. This was leading to problems, with consultants reporting that some members faced delays getting through to helplines, making claims or seeking help from the wellbeing support services.
Lewis pointed out that many insurers stopped hiring people during the Covid pandemic, and are now playing catch-up, with business growing and a big jump in the number of referrals for treatment post Covid. “Lots of businesses have started to recruit heavily to deal with this increased demand,” he added.
“All this is going to lead to potential difficulties at renewal,” he added. “On the one hand the client has been on the phone for 45 minutes trying to make a claim, but they are also getting hit with a 25 per cent premium increase. That is not a fun conversation to have.”
Pugh agreed that these service problems were making the consultant’s job considerably more difficult. “It’s actually creating more work for us, because you know we’re consultants, not just brokers who do the renewal once a year. The client will come to us if there are problems and the question is who is going to sort this out. Is it the consultant would rather be doing more strategic stuff and selling more services to clients? Or is it the back office team who don’t necessarily have the skill set to negotiate or put pressure on insurers. It is a challenge.”
Holmes said that some insurers are managing to “turn it around” when it comes to service problems. “But the service standards from others are still appalling. This protection and healthcare benefits sector must be the only industry I’ve seen that uses technology to go backwards, and where it now takes longer to do certain tasks.”
Holmes wasn’t the only adviser present to express some reservations about the adoption of technology in the sector, and whether it was always being utilised to help the consultant, client, or end member.
Digital trend
As highlighted by the Workplace Protection and Wellbeing report, there has been an increased move towards digitalisation and automated services in recent years — whether it is ensuring support services can be accessed via an app for members, or offering online quoting and renewal services for clients.
Parker said that while he is in favour of this trend more generally, it has, in some cases, led to more work for consultants. “I think the ability to do quotes online is good. But it does transfer a lot of work back to us as advisers, and it also transfers some additional risk.”
However, advisers said there was considerable variance between the technology and portals offered by different providers, and across product areas.
Gloyne said that online quoting had helped improve service standards. “You can do much more online now through these portals, which means we are not waiting two to three weeks for quotes. I think this is driving up standards.” However she noted that there are differences between what is available in the group risk and PMI market. “What is available in the group risk market has come along in leaps and bounds. But I’d say the opposite is true of the PMI market. There are some insurers in particular there that are way behind the curve.”
Many of the insurers present commented that Canada Life’s We Care portal was a good example of technology that was working to the benefit of clients and consultants. Holmes said: “Credit to the Canada Life team for this technology. Although my team is inputting some of this information, ultimately it takes less time because they’re not chasing quotes. But aside from initiatives like this I don’t think there’s been a huge amount of technology innovation across the industry.”
Canada Life sales director Rus Waygood said that the firm had invested considerable sums into this technology in recent years, with a view to driving up standards. He added that the industry — like many other sectors — had been hit by a combination of rising demand amid recruitment issues, but he said Canada Life was getting on top of these problems. “We’ve grown our headcount by 150 since the pandemic and will continue to do so, to get service standards back to where they need to be.”
However he added that the insurer has always had a focus on sustainable pricing, rather than chasing market share via ultimately unprofitable premiums. ”If you have got margin you have that sustainability and cost certainty for the client and this also enables us to invest in system, and invest in our teams.”