Special report group risk adviser forum

Raising the status of group risk benefits amongst employers, employees and the government is crucial to the expansion of the sector. Advisers want providers to lobby ministers hard on the issue reports Nick Golding

Getting employees to place a higher value on group risk products is a priority for expanding the market, according to delegates at the Group Risk Adviser Forum (GRAF) last month.

Advisers accept that the government has been working hard at raising the profile of absenteeism among workers in the UK, but argued there is still more to be done with regards to the broader group risk agenda.

According to forum speakers the government is not taking seriously enough the link between group risk products and what they can do to help UK employers effectively manage absence.

David Williams, risk benefits consultant at Hewitt, said: “If the government could chip in and make group risk products more cost-effective for employers that may certainly help the market. After all, these are voluntary benefits.”

Tax-breaks may be an aspiration rather than an immediate target at the present, but such a development would also encourage employers to take on group risk for the first time.

“In terms of incentivising employers to provide income protection for staff, I wholly agree that additional tax-breaks on corporate-sponsored income protection would grow the market,” added John Russell Smith, client director at Lorica.

“Group risk products benefit the individual, the employer and also society, and this should be recognised more by the government. The benefit can relieve the financial strain on the State,” said Carlos Correia, senior consultant at Lane Clark and Peacock.

Offering tax-breaks on group risk products for employers was one remedy that was discussed at the forum, as this would encourage employers across the UK to promote the products to their staff.

Another method of increasing awareness among employers in the UK is to encourage the government to request companies to report each year on the measures that they have in place to deal with absenteeism in their annual accounts. While it is not proven whether companies with good human capital management perform better because of their treatment of staff, or they treat their staff well because they are good companies, there does seem to be a correlation between profitability and best HR practice.

Companies are constantly in competition with one another, and if it was necessary to report on the measures in place to deal with absence, having a range of group risk products in place to deal with sick staff would soon become best practice, and other employers would be sure to follow their competitor’s lead, said Correia.

“Perhaps some sort of corporate responsibility section where employers could comment on what they provide in terms of wellbeing for staff should be incorporated. I wouldn’t like to see it made compulsory to provide group risk, but if it was seen as best practice maybe more employers would be encouraged to value it and start providing it,” he said.

So who should be trying to make this change happen in Whitehall? When it comes to the responsibility for lobbying the government around the promotion of group risk products to employers, GRAF delegates were agreed that it was down to insurers.

“If there is any lobbying of the government going on it would have to come from the insurance providers and insurance companies, simply because it is in their interest more than anyone else, to get tax-breaks on these products,” Williams explained.

Guy Roberts, director of Portus Consulting agreed. “In reality it does not matter to my business whether the market grows or not. The effort that is required for me to go and get somebody to take on a scheme where they haven’t had one before is so much more than targeting those already with schemes, that it is not in my firm’s interests to do it.”

Not only do the insurance companies have the budget, they also have the experience of lobbying the government, so could use this experience effectively, said Correia.

“The insurance companies are in a financial position to lobby, and they are also familiar with lobbying the government on other issues as well,” he said.

If successful such activity would undoubtedly be a positive step in raising the profile of group risk. The fact that health and wellbeing is commonly found in television, the national newspapers and magazines should be fertile ground for promoting wellbeing products, say advisers.

“The wellness debate is growing and is even reaching breakfast television. This is a level of debate that I don’t remember seeing in previous years, so this has to be a step in the right direction from a group risk perspective, because when you talk about wellness and absence it will ultimately lead to group risk,” explains Correia.

The forum also explored the possibility of there being a lack of confidence from employers in the group risk market and also with intermediaries.

Advisers felt that the new examinations that have been created by Grid will encourage more employers to purchase products from intermediaries that have passed the exam. But the exams will be targeted at group risk specialists who are starting out in the industry, as opposed to those at the front line, which may not lead to too much more confidence among employers, as actual product sellers will not take the exam, said Williams.

“They may give employers a bit more confidence in products, but I think these exams are more for backroom staff, to give them a grounding on what the group risk industry is all about,” he explained.

However, others were more supportive of the new exams, saying that they will encourage confidence among employers and are a positive step in weeding out the individuals in the market that are misleading employers. “If the exam raises the standard in the industry it can only be a good thing for us all. Hopefully it will mean that less people will be misleading clients into buying products that they don’t actually want,” observed Correia.

One talking point at the forum was not necessarily whether employers understand the true value of group risk products, but whether this knowledge and understanding is being successfully passed on to the members of staff that are using the benefits.

Russell Smith said that employers he deals with understand the benefits themselves but are not extracting maximum goodwill for the benefit spend through employee awareness. “My clients do place a value on the provision of group risk benefits. They understand the benefits of offering them, but there has, on occasions, been a general reluctance to communicate the full value of these benefits to eligible staff,” he said. One reason for this reluctance to pass on the true value of group risk perks, income protection especially, could be down to the fact that a small section of the workforce may see such perks as an opportunity to take paid leave from the workplace without genuine illness.

“Part of this reluctance to effectively communicate group risk products to staff is for fear of creating a ‘sick culture’, whereby employees that know they have an income protection product, decide to take advantage of that, especially in an economic climate when many employers are downsizing,” added Russell Smith.

However, other delegates see this as less of a problem, simply because insurance companies tend to be thorough when they are paying out to employees claiming illness benefits.

They argue that insurance companies will be quite sure that the money they are paying out in an income protection scheme will only be to those that cannot make it to work through illness.

“I do hear and know of companies that keep benefits a secret because they don’t want employees claiming on them, but it is pretty rare. It is highly unlikely that an insurer will let someone get a claim through unless they are genuinely sick,” said Correia.

That said, the general message from advisers present is that if the value of group risk products is to rise amongst employers and employees there is a need for the government to play a more active role in promoting the advantages of the benefit.