How does this sound for a proposition? Substantial life cover – often equivalent to up to four years’ salary or even higher. Up to around three-quarters of your salary for as long as sickness prevents you working. Maybe a lump sum if you are struck by a critical illness
Any or all of the above being provided free of charge and, usually, without the need for any, or just minimal, paperwork.
The natural reaction to such an offer would be ‘Where’s the catch?’, but for millions of people there is no catch and the proposition is as good as it sounds. They are, of course, members of group schemes where the cover is provided by their employer.
It is an incredibly powerful proposition, even without all the ancillary benefits that get attached to group schemes, and its importance is shown by the amount of cover provided through group schemes. Swiss Re estimates such arrangements provide around 40 per cent of all the life cover and more than 70 percent of income protection cover in the UK, providing for around seven million people. But this is still a minority of the working population and growth in the group risk market, in terms of numbers of people covered, has been disappointing for several years. Why is this?
The ‘catch’, such as it is, is that the employer has to be persuaded that this proposition is sufficiently compelling to be worth spending money on. Many people outside the industry will not be aware of the benefits of group risk cover or even what it actually is. Focus just on employers and the picture is not much better. In researching for their ‘Insurance Report, Life at the crossroads’ in 2007, Swiss Re asked companies not providing death or disability cover why they didn’t. Different answers came back, but the commonest single response (34 per cent on death cover, 38 per cent on disability) was ‘Don’t know’. Another 14 percent said ‘They had never thought about it’. I do not know what the equivalent responses would have been if companies had been asked if they insured their premises, but suspect very few would have said they didn’t and ‘did not know’ why.
So what needs to be done? Those ‘don’t know’ and ‘never thought about it’ statistics suggest there has to be engagement with, and education of, all employers. This is a challenge for providers and advisers because, as we know, the majority of companies consist of just a few employees and catering for such clients has been traditionally uneconomic. Fortunately, web technology gives us the chance to create business models that are economic and group risk companies are starting to do this.
However, while it is essential that employers are engaged, I think there is an even more crucial need to ensure that employees appreciate the value of group risk benefits. If more employers are to be persuaded that group risk benefits are worth spending money on, we will have to demonstrate that providing benefits really does make a difference to their ability to attract and retain staff and to their companies’ overall wellbeing. At the moment, we know that there are many people who enjoy very good benefits (the spectacular-sounding proposition I started out with) but who have only the haziest idea of what these are at all, let alone how good they are. We have to get the message across that to have life, income protection or critical illness cover courtesy of your employer is a tremendous asset, and that to be without it is to be at a serious disadvantage.
Where does responsibility for getting the group risk message across lie? Providers know it is their responsibility to promote the benefits of their products. It can be all too easy to get lost in detail and forget about what difference our products and services make to individual lives and corporate cultures. But to have the biggest impact we also need to act in a concerted and co-ordinated way. We have an industry body, GRiD (Group Risk Development) that comprises providers, advisers and reinsurers. GRiD has set up a working party to look specifically at ‘Growing the market’ and I hope to report back later in the year on initiatives that arise from that project.