Cost savings will only take you so far and no further

Nearly every day I speak with a customer about their employee benefit spend, how they can save money and the best way to go about itMost clients appear to want their cake and eat it, insofar as they want to reduce their expenditure but are very reluctant or totally unwilling to alter their benefit design.

It is our responsibility to deliver this no matter how unachievable the task appears to be.

Whilst reducing costs may be attainable in the short term, through competitive market pressures, we all know this is not sustainable longer term if we want a healthy selection of insurers in the market.

In fact it’s a requirement, in everybody’s best interest, to ensure there is a robust selection of financially strong providers to deliberate over.

The sad loss of Aegon, which may be attributable to many reasons, is not in the best interest of our clients and we need to ensure that other providers do not follow a similar route.

This could become a real possibility if the only cost saving solution the industry can offer is negotiating the providers’ margins into a position of long term unsustainability.

Naturally the providers have their own responsibility in this area but it always appears to be the case, at any given time, that there is one provider who is willing to take a “punt” to secure business.

We are all guilty of taking advantage of these situations and it serves our customers well in the short term. In the longer term, however, we may be left with only one or two providers because cost pressures are forcing them to rethink their strategy. It is our clients that will suffer longer term.

What can we do to help clients reduce their cost?

And what is considered thinking “outside of the box”, whilst not impacting on the profitability of our providers?

There are a number of things that can be done. Flexible benefits can be introduced on a cost neutral basis.

The introduction of flex helps the employer spread their risk of poor claims experiences, which drive up employer costs.

Flex can also be used to counteract negative communication to employees if the employer is forced down the route of withdrawing or restricting benefits.

Providers can also make voluntary benefits more attractive to employees by simplifying the buying and processing method in order to make these products more appealing to the buyer.

There are other things we can do to help our clients make ends meet.

We can move away from payroll deduction for voluntary benefits and help our clients reduce costs through the maintenance of these schemes, which quite often involves additional headcount.

Combining life and critical illness policies on a voluntary basis would be attractive to staff and will add value, as far as the employer is concerned, at no additional cost.

Online boarding would reduce provider costs and these costs could be passed on to the client.

As far as I’m aware there is only one provider who does this well and it is a long way ahead in the market place.

The ideas above are not new and some can be achieved immediately through the current proposition.

It’s not rocket science and in an ideal world we would be able to offer these solutions to our clients.

We all have a responsibility to the group risk market.

However the providers need to do more to ensure there are other cost containment measures to help ensure the longevity of our market.

In a nutshell we need to get smarter and better at what we offer and what we do.