I never thought, many years ago, that I would end up as a fan of traditional Group Private Medical Insurance (PMI) and Group Income Protection Insurance (GIP). I spent most of the first decade of my career trying to break these markets, desperate for something new and 'more effective'. However, as they've continued to stumble along as key employer benefits, surviving through economic recessions and global pandemics, I have slowly learned to love and respect them both.
GIP is an insurance product that provides two key services and then several additional added value services.
The first service is rehabilitation support. If you have an employee who is absent, you can contact your insurer and they will look to engage a variety of support services to help get the employee back to work. This support can be very useful to any employer, especially if they don't have any good occupational health support.
The second service is pay protection. Employees are insured for a % of their salary, let’s say 50%, after a period of absence has passed, let’s say 26 weeks, for a period, let’s say 2 years. This helps supports the employer in supporting the employee financially during their absence.
The added value services are normally wellbeing focused. There is often a full free employee assistance programme included in the package. Many include some form of Virtual Private GP offering and others include some form of wellbeing app that has information and support services to help employees with health and wellbeing issues. That is a nice package for an employer. It is certainly a powerful health and wellbeing message to your employees - Here are some tools to help with your general wellbeing. If you do get ill or injured, we will support your rehabilitation. If we cannot rehabilitate you effectively, we will support you for a period with a reasonable level of pay!
And yet less than 10% of employers have this insurance in place for all or some of their employees. Cost is meant to be the issue, but it doesn’t really make sense. The insurance will normally cost less than 1% of pay roll. Your workplace pension contributions, as an employer, are at least 3% (under Auto Enrolment rules). Most businesses have some level of ‘long term’ sick pay promise above the horrendously low statutory level and often, if they do not, they may feel like they should offer some support ad-hoc for a period. Fair play if you can exit a seriously ill employee on capability grounds after 28 weeks with a simple shrug of the shoulders. I’m not judging, but that is normally a tough move for everyone concerned. Essentially what I am getting at here is that there is a cost to absence regardless of your approach and there are significantly more expensive benefits that you fund as an employer. GIP is not that expensive that it shouldn’t be a consideration by any moderately successful business after they passed the survival phase of running their business.
So, if it has all this value, why isn’t there more new business happening in the GIP market?
Well, it is a complicated product which makes it hard to understand. The real benefit comes to employees who get ill, which is hopefully relatively few. It also doesn’t really have any big advocates making noise about how great it is.
I'm not sure I can really explain PMI as a product anymore. In a previous blog, I mentioned that changes to how it works have rendered the normally acute / chronic explanation of what it covers somewhat meaningless which also excuses me from the hassle of having to explain acute / chronic to begin with 😉
These changes have also brought even bigger problems to a market that was already often seeing double digit annual price inflation at renewal with many insurers now quoting double digit medical inflation (ranging between 10-20%) and significant claims incidence and value inflation (20-25% claims incidence increase reported by one insurer). Welcome to a world of potential 20% annual increases for relatively stable claim performing schemes.
Anyway, I’ve put the cart before the horse here. PMI is basically a tool that provides access to employees to rapid diagnostics and straightforward, normally non-complex specialist advice and treatments in a private setting (other specialist can mark me on how many holes there are in this description, more than enough to drive a bus through no doubt). In a world where the NHS is really, really struggling, this is a godsend for those that have access to it (as shown by increasing membership to existing schemes and the surging use). It is arguably the most popular employee benefit for employees now.
So, the value of PMI to the employee is a ‘no brainer’. In a world where the NHS is underperforming for some people, PMI can literally be a life saver.
However, is there value to the employer beyond employees rating it as a valuable benefit? I think so, but I can’t prove it directly. The idea is that it should help employers get back to work quickly and support the overall health of the employees within the business. I’m not aware of any published studies that show that the use of PMI reduces absence, which is a shame really, but the argument is intuitive. Come on providers, do some academic work for us (or pay someone to do it for you) and prove this one. Sales 101 is to have a value statement for your product and providing an evidence base for PMI as a rehabilitation tool would be helpful. On the overall health statement, group protection providers, you know the ones that offer GIP, offer discounts to their rates to employers who have PMI cover in place for all employees. This is because there is a strong correlation between having PMI and good general health (although you could make the case that most employers who offer PMI are high paying firms, and this is the wealth / health correlation in play).
Like GIP, PMI has a range of added value services that come with the PMI cover. Virtual Private GP is very much core to this, alongside a wealth of health information and some varying degrees of complexity wellbeing tools.
TLDR, PMI is well liked by employees and there is a reasonable value case for having it in place for employers.
GIP and PMI together, forever
Hopefully, I've shown the potential value of GIP and PMI as individual products. However, the real story is in having both in place to complement each other. PMI helps employees and employers get rapid diagnosis and some forms of treatment. If this can't help with the rehabilitation of an employee, then GIP kicks in - potentially helping with rehab and, if it is unsuccessful, then supporting the employee financially.
The suite of added value services you get from having both can also strongly unpin any employer wellbeing strategy. If you are focused on physical, mental, and financial wellbeing, you will have a lot of boxes ticked off with these two bad boys in place.
And that's the true magic of the GIP and PMI love story, that once you put them together, they are likely to prove inseparable for your business due to their effectiveness. I've seen relatively few divorces in this space in the last 25 years.
How's a bit of help Gov?
I mean, it would be helpful if we properly funded the NHS to take in to account the number of staff it actually needs to function effectively, invest in technology, invest in facilities and make sure we can cope with the UK demographic trends for the next 30+ years. I won't hold my breath whilst I wait for this to happen.
Instead, let'suse the classic organisational tools of regulation and taxation:
- James Hall, a fellow Partner at EBC, has historically made the case for GIP to be funded for all employees via the next increase in pension contributions within the workplace pension regime. Instead of putting an additional 1% into pensions, let's use 0.5-1% to fund a level of GIP for all employees in the UK. This would massively increase the protection for employees in respect of having a serious health problem occur whilst they were employed.
- Like pensions, let's give 'all employee' GIP and PMI some tax breaks for the premium paid by employers. Give tax relief on the premiums as a business investment. Look at VAT, IPT and P11d for PMI. This would provide employers with additional incentives to invest in these beneficial insurances.
Can a love story change the world? No, but it can make a difference to some people. Perhaps with a few beneficial tweaks, this one can inspire a nation???
Andrew Supple, Partner