Clever additions

Added-value features can tip the balance when selecting a group risk products if all the other factors are equal. But advisers can only truly add value by keeping add-ons in perspective, says Edmund Tirbutt

Few group income protection and critical illness cover schemes now fail to boast their own “added-value features”, which are included either automatically or for a small additional charge, although taxation considerations mean that such additions have been harder to structure in the group life sector.

General health and wellbeing tools now figure prominently. For example, all members of Bupa group risk schemes and their families have access to HealthLine, a telephone service staffed by experienced nurses able to deal with any issue. Similarly, members of Norwich Union Healthcare group income protection schemes can use Personal Health Manager, an online information service designed to help people get and stay healthy.

Best Doctors, a comprehensive medical referral service, is one of several added value features available on Canada Life’s group income protection, whilst those making claims under Aegon Scottish Equitable’s group critical illness cover schemes can receive telephone support from qualified nurses via the Red Arc Care Advisory Service.

Legal & General offers a basic but free employee assistance programme (EAP) on all its group risk products, and employers with over 500 staff who take its group income protection can benefit from an Early Notification Bonus Scheme (see Box). Even Unum, which had previously prided itself on not offering add-ons for the sake of maintaining transparency, has recently introduced the chance to add its Absence Management Assessment Service to its group risk products. This leaves Friends Provident as the sole add-on free zone.

Stephen Browning, group income protection product manager at Friends Provident, says: “Under Treating Customers Fairly we have asked customers what they want from us, and around 80 per cent of employers said they would look at the competitiveness of products and not at the value added services. They pointed out that they could source these services for themselves if they needed them and were not convinced that a bundled package would suit their needs. Two years ago these additional features seemed new and interesting but now employers are a bit sceptical about them.”

Intermediaries who specialise in the group risk market frequently highlight the odd added-value feature that appeals to them but most advisers warn against letting the tail wag the dog. They are strongly of the opinion that, whilst bells and whistles can occasionally tip the balance when there is little else to choose between providers, they should not come into play until well down the decision making chain. Contract terms, service standards, the ability to pay claims and the quality of claims management are considerations that should all carry much greater weight.

Mark McLeod, risk benefits manager at national IFA Towry Law, says “Group risk products are all broadly similar to a degree in that all the companies offer a range of benefits that do the job. But when it comes to distinguishing features, we tend to focus quite heavily on the ability to pay genuine claims and to provide quality rehabilitation services to get individuals back to work.

“Add-ons come a clear third, but we still talk to clients about what’s important to them. If, for example, they want a group income protection scheme and Legal & General is competitive, the fact that the client likes its ability to offer a free cut-down EAP might tip the balance but what it won’t do is to actually change our recommendation. Legal & General’s Early Notification Bonus Scheme is possibly the one exception to the rule because it is offering the employer a tangible financial reward.”

Alex Reeves, head of employee benefits at London-based IFA Baigrie Davies, is broadly similar in sentiment. If there is little to choose between income protection schemes, he finds that the merits of Canada Life’s Best Doctors and some of Bupa’s wellness-type add-ons can be worth considering but stresses that their benefits must be effectively communicated to the client.

Stuart Gray, managing director of national benefit consultant Portus Consulting, singles out Legal & General’s free basic EAP and Canada Life’s Best Doctors as being add-ons that can make a difference if pricing and claims management philosophies are broadly similar. But he feels that insurers should have tried to distinguish themselves by focusing on a far more basic priority.

He says “Most have good claims philosophies but their actual administration is rubbish, so I can’t help feeling that providers would be better off improving their overall service standards first. These are very poor and, although they have recently been trying to make out otherwise through talk of improvement, you have to wonder whether they have ever heard of Treating Customers Fairly.”

The providers themselves, whilst never short of gut feelings that their value added features are making all the difference in a fiercely competitive marketplace, tend to offer little concrete supporting evidence. Some have no idea of the extent to which these features are used by their clients and volunteer that they consider it impossible to monitor the benefit they themselves derive in financial terms.

Aegon Scottish Equitable is a notable exception. It reports 87 per cent of critical illness cover claimants that were referred to the Red Arc Care Advisory Service made use of it. Of those that didn’t, 6 per cent were not contactable and 7 per cent did not want any further help. 76 per cent of service users received telephone counselling and 17 per cent received complementary therapies like massage or acupuncture.

The telephone bereavement counselling service that Red Arc provides on Aegon Scottish Equitable’s group life product has attracted a lower usage, with 50 per cent of cases having gone on to receive some form of telephone counselling and the other 50 per cent indicating that there was no need for additional support.

Simon Bailey, head of employee benefits marketing at Aegon Scottish Equitable, says “Both sets of usage data give me great belief that our added-value offering genuinely does deliver, especially when compared with the 10 per cent usage figure traditionally quoted for EAPs. This demonstrates the importance of delivering genuine added value in product extensions by focusing on the core purpose of the product and the core reason that people choose to buy it. Noticeably, the real advocates of the service are those advisers who have already had claims that have benefited from it.”

Canada Life highlights the fact that its share of the group IP market rose by 1.6 per cent during 2006 to 18.6 per cent and feels that the introduction of both Best Doctors and its BusinessCare information service in April 2006 contributed towards this. The feedback from its distribution team is that both services are helping to differentiate its income protection offering and helping IFAs to construct reasons why letters. It also points out also that Best Doctors can save lives and that you simply cannot calculate the value of this in financial terms.

No-one should criticise insurers that offer value-added features for attempting to be innovative in a market where innovation has been in lamentably short supply, and some of these add-ons clearly have their attractions. Nevertheless the best way that intermediaries can add value for their clients is to ensure that these features are relegated to their correct position in the decision making process. n

Advisers view
“Employers who provide details of 80 per cent of absentees within two weeks of the end of the four week absence period qualify for a 5 per cent bonus”

A double win situation

Martin Roberts, account executive at James Hampden Insurance Brokers, based in Ashby de la Zouch in Leicestershire, will definitely be bearing in mind Legal & General’s Early Notification Bonus Scheme for future group income protection clients with over 500 employees.

This April he introduced marketing and information solutions company Acxiom to the concept, when arranging an income protection scheme for its 900 staff with L&G. The scheme rewards employers who provide the insurer with details of members who are continuously absent from work on health grounds for a period of four weeks. Employers who provide details of 80 per cent of such absentees within two weeks of the end of the four week absence period qualify for a 5 per cent bonus.

Roberts says “A lot of companies are starting to offer incentives for early notification but this is more structured. Because the HR department receives a cheque rather than a discount on insurance premiums they feel it’s a reward for their achievement, and the HR manager at Acxiom is certainly very happy. Because the employer is prompted to provide early notification of claims, it also reduces claims costs and therefore creates a double win situation.

“As far as I am aware, 100 per cent of Acxiom’s notification forms have been submitted within the required six week period, which represents a marked change in company culture. Some people are fairly sceptical about added-value features in group risk, but this seems to be one that certainly deserves to be born in mind during the decision making process.

At a glancen

  • During the last two years added-value features have become common on group risk products.
  • They can tip the balance when there is little to choose between cover and price. The ability to pay and manage claims is, however, a far more important consideration.
  • The benefits of value-added services must be effectively communicated to clients.
  • Providers tend to offer little concrete evidence about take-up rates and financial benefits gained.