Throughout my career in Employee Benefits Consultancy, I have constantly pushed for change (preferably change for the better). And yet, as I work in my third decade in this industry, I can see that in respect of the core products we advise on, I’ve achieved very little real change.
However, with my youth behind me (way, way, way behind me), I am beginning to think that this may not be a terrible outcome. The fact is – the survival of these core products is actually because they do the job they were designed to do well and, thus, don’t need to change very much. There is even a case, with group income protection, that aspects of the product have changed too much (or not in the right way)!
Group Life Assurance (GLA)
My colleagues and I have made several attempts to make this a simplified and modern proposition. We tried a fixed lump sum approach to make it easier to understand and fairer to all employees (breaking the link with salary). We tried to add-on additional aspects to the cover. We looked at matching cover to other products. However, it has resisted our attempts. And that is okay because what group life assurance does, it does well.
Group life assurance cover is a good solid insurance proposition. It is a relatively cheap employee benefit, provides a good pay out should a tragedy occur and has almost no clauses that would prevent payment by the provider. Almost everyone is covered from day one without the need for medical underwriting as ‘free cover levels’ are high (as long as it designed that way). It’s no wonder that most UK employers have it in place for their employees and, those that don’t, really should pick it up.
Group Income Protection (GIP)
People who don’t really understand the proposition would argue that it has changed a lot over the last twenty years, but that is nonsense – the product essentially remains the same as it was when I started in this industry. Sure, providers have stepped up their game in terms of rehabilitation services and added value services which should be applauded, but the basics of the insurance product has been pretty consistent over the last 20 years – it pays out a percentage of salary for a period of time to support an ill / injured employee.
Sadly, ‘Brokers’ have conducted a hatchet job with their fixation on price over value – a race to the bottom – meaning that many employers’ group income protection schemes are now hollowed out version of the original plan which don’t mesh with their short or long term absence policies or their attitude towards their employees’ wellbeing. Time and again I speak to employers where a limited payment term has been implemented and they have not discussed how they will manage the employee at the end of that period when the financial support dries up!
Yet the product is still in place with some employers doing its original job – providing financial support to the long-term sick. This is the version of the proposition that the industry needs to support, rather than salami slicing it in a never-ending attempt to reduce ‘the cost’. The cost is only what the employer is willing to promise in respect of protecting their employee’s wellbeing. The cost is also significantly less than pension or private medical insurance expenditure – my colleague, James Hall, wrote a great blog on covering the cost of group income protection for employees as the next stage of pension auto enrolment.
Basically, if you genuinely care about the wellbeing of your employees, then there is an extremely strong case for group income protection to be part of this strategy. Employees will get sick. This product can support them. Some will get seriously, long term sick. This product will support them. Use this product to show that you care about the wellbeing of your employees and you will understand that the cost of this product is outweighed by its value to both your employees and your business.
Private Medical Insurance (PMI)
I could fill twenty blogs about my problems with PMI as a product.
I could talk about how it has no solid data that proves that it is of any real use to UK businesses. I could talk about the broken age-rated market where spurious Intellectual Property and Data Protection excuses protects the providers from any genuine competition. I could talk about the lack of support to customers and lack of quality control to ensure that the treatment they receive is from the best people in the best treatment centres – a defence they dress up as protecting ‘customer choice’. I could talk about the wellbeing smokescreens that are used to promote products but don’t actually work in respect of improving the health and wellbeing of your employee population.
At its core, whilst niche and mainly for a small population, PMI remains a really useful benefit. The primary benefits remain, as they always have, bunking the NHS waiting lists and getting rapid access to diagnostics. For someone who has a health issue crop up, the value of this cannot be overstated. You won’t find many people who have actually had to use PMI questioning its value as an employee benefit and that is normally at least 1/3rd of those covered per annum. It is no wonder it is often either the most popular or second most popular UK employee benefit in industry surveys. Additionally, service to the employee by providers in the healthcare market is usually excellent. Sure, it is just a fancy payment of bills service, but most providers have a slick call handling operation in place which works. Kudos to you UK Healthcare market!
The elephant in the room with PMI is that price is a real issue, especially in the age rated market. Due to the relative transparency in the claims rated market there is less disgruntlement around annual price increases as you can clearly see what factors are driving the price – normally the claims your employees and their family are making. However, annual double-digit increases are putting pressure on a relatively small market. New PMI schemes are rare, and the rise of self-pay is increasingly the main story for hospital operators who are looking to diversify their income streams.
Does this mean that PMI does need to change? Yes, but not extensively. A simplified, budget option is a must to encourage new business into the market. Better communication of the value of the proposition is badly needed – the market seems to have given up the fight on this front in respect of genuinely evidencing the benefits of PMI with actual data that shows its positive impact. Additionally, the rise of virtual GP services, other health technologies and other added value services provide the opportunity to offer a genuine one-stop, end to end healthcare service to employers for all their healthcare needs – prevention, primary care, diagnostic, out-patient, in-patient and rehabilitation. This can provide a new set of evidence about how PMI helps employers with the health of their employees.
So, more than 20 years on from my first look at these three key benefits, I no longer have the full sense of frustration about them and their lack of change. Instead, I can salute their effectiveness and durability in a challenging market and instead think about the opportunities to continue to improve them on an iterative basis until a real moment of disruption occurs (which might be now?).
If you want a genuine debate about the value of employee benefits and their effectiveness, come speak to the experienced, innovative team at EBC-LLP.