The industry is divided about how best to promote group risk to a wider audience. Edmund Tirbutt finds solutions ranging from auto-enrolment to new adviser relationships
Whilst there was unanimous agreement at the Group Risk Forum about the importance of raising the profile of group risk, it was clear that not everyone in the industry is singing from the same hymn sheet when it comes to the best way to proceed. For some it is all about lobbying government to secure some form of auto-enrolment or at least move the issue up the political agenda, whereas for others it was more of a question of directly engaging consumers and intermediaries.
In Let’s Put Group Risk at the Heart of People’s Cove r, Ellipse chief executive John Ritchie left no-one in any doubt that he thought it was a question of when rather than if group risk auto-enrolment would occur.
He said: “If the government thinks that pensions can be sorted out by a combination of employers, law and obligation then what could be next? It could be long-term sick pay and the question for us as insurers is do we want that? The question for the traditional pensions providers was did they really want auto-enrolment of pensions? And I’m not so sure if any of them did, but they got it. So group risk insurers need to be getting ready now in terms of product structure and underwriting methods, and I think it’s doable.
“The interface between welfare benefits and insurance sick pay is difficult. It’s not as simple as pensions because the welfare system will always want to pay for families to keep kids out of extreme poverty. But digitally we can develop rules-based systems that could tell people when to buy top-up cover or when to basically stay with State provision. We may have a situation in which employers are obliged to facilitate this but not necessarily provide entire working-life cover for their employees.”
“Coherence in pension policy has already arrived and I think this is the path we are going down,” he continued.
“We like to think not too much changes in our world but the good news is that we are already in the middle of this change. I think that for advisers the big question is do you want to earn more for actually doing less? It doesn’t matter if you are a network three man band or global employee benefits consultant, the question is whether you will change enough to let your insurers and providers do some of that work for you.”
Ritchie aptly concluded his piece on the likelihood of sickness protection being outsourced to the private sector with the words of philosopher Arthur Schopenhauer, who had observed that all truth or change passes through three stages: “First, ridicule: second, violent opposition: and third, acceptance as self-evident.”
But when the audience was asked during the interactive voting session “Should the Government extend auto-enrolment to income protection?” 88 per cent said that it shouldn’t. Many of the reasons for this point of view became evident in the Panel DebateThe Future of Group Risk.
Speaking from the panel, Group Risk Development (Grid) spokesperson Katharine Moxham made it clear that she didn’t have a mandate to lobby for auto-enrolment and raised the issue of who would be the insurer of the last resort, like Nest is for pensions, posing the question whether we would have to have a government insurer of last resort, in the style of Flood Re.
She said: “Within Grid we don’t have a consensus on whether providers want auto-enrolment for group risk. Nevertheless, the government could do more to raise awareness of how people can protect themselves, and is doing so through its simple products regime. I could see group risk providers partnering with fund providers to offer added-value features.”
Fellow panellist Steve Herbert, head of benefits strategy at Jelf Employee Benefits, said: “I personally think auto-enrolment will never happen in this space but it at least needs to be on the political agenda. If you get politicians talking about it then it will get greater media attention like with pensions currently. At the moment whenever there’s a pensions announcement of any sort it’s always one or two on the national media.
“I don’t think it necessarily has to be the government, it just needs to be some political influence, and quite often political influence comes from opposition parties. It’s just about getting that physical movement into the media space and showing that it’s something important that people need to know about.”
Also speaking from the panel, Aviva head of group risk Steve Bridger warned everyone to “Be careful what you wish for.”
He said: “As soon as the government gets involved with anything and it becomes dumbed down and standardised in a way that everyone can access then is it valuable anymore? You will lose innovation in product design and the only thing you could compete on would probably be price. So let’s get the awareness up and do something about it. Auto-enrolment would only be a proper, proper last resort.”
Audience member Liz Walker, head of strategic partnerships at Unum, said: “Four times the number of workers in the US have long-term income protection than in the UK and it’s not because of the government. It’s a cultural shift. If government gets involved it has the potential to go the wrong way and create products that aren’t of value and become a tick-box exercise.”
Speaking from the panel, Unum customer solutions director Glenn Thompson, said: “Research we’ve done shows that offering some sort of tax break would be a very, very sound financial decision by the government. This is a more likely mid-term solution than auto-enrolment.
“I would be happy in my lifetime with very strong double-digit growth for group income protection in the next three to five years. It can be achieved with really good communications, crisp messaging and simple products, and we don’t have to rely on the government doing anything.”
In a standalone presentation earlier in the day, Thompson had demonstrated some good reasons for his optimism in his session “Growth in the GIP Market, where hehighlighted how Unum had covered an extra 200,000 employees for group income protection during the last two years. The largest source of its new business was not switch business but first-time buyers and the second largest source was existing clients expanding eligibility to a wider group of employees, he said.
Furthermore, intermediaries were clearly making the difference by talking about income protection for the first time. Unum research found the main reason why customers bought for the first time was because of IFA recommendation (44 per cent) – the second main reason (38 per cent) being to attract and retain talent. In the last two years 1,000 brokers had asked Unum for group income protection quotes for the first time and 350 had given it first-time buyer business in each of the last two years, said Thompson.
“We have bought 800 to 900 first-time buyers to group income protection in the past two years” explained Thompson. “The key influence has been the intermediaries but the market is also changing and employers and employees are far more aware of any potential disabilities and of the risks they face than they were two years ago. Employees are more prone to asking about income protection and employers are now more open to buying it.
“There are many costs that businesses can’t control but some they can control, and this is therefore the reason why some are buying income protection. There is also a realisation that people are starting to move in the job market, which is making employers more conscious of retention considerations. For the first time now people are turning up at job interviews and asking if the company has group income protection in place.”
Unum’s well-documented recent marketing campaign – which had included extensive national TV advertising – to raise awareness of group income protection had clearly played a major part in this. In May 2011, prior to starting the campaign, only 4 per cent of employees intended to ask about income protection at work but by May 2013 this had risen to 17 per cent. Similarly, in May 2011 only 9 per cent of employers intended to buy group income protection but by May 2013 this had risen to 19 per cent.
But when asked in the panel debate The Future of Group Risk whether we would be seeing a new round of TV advertising from Unum in the light of this success, Thompson made it fairly clear we wouldn’t.
He said: “I doubt it because it was pretty expensive and the whole campaign was phased. Unum is now focusing on three areas, which are bringing new brokers to the market, supporting existing brokers to target new and existing clients, and trying to get to the decision makers of clients. It’s less about getting to the end employee at present.”