Rational health service?

With auto-enrolment of pensions enabling advisers to talk about group risk, could we even see auto-enrolment for sickness protection? The tide of opinion may be moving that way, finds Edmund Tirbutt

When it comes to protecting their workforce, there tends to be a discrepancy between what employers say and what they do. That was the contention of Unum CEO Peter O’Donnell at the Corporate Adviser Group Risk Forum in December. In a session headed Minding Your Business – Employee Wellbeing Through Workplace Benefits, he pointed to research showing that while 90 per cent of senior execs say their employees are their most important asset, only one in 10 private sector employees is covered by group income protection.

So should the nation’s employers be compelled to offer a form of sickness protection or, as with pensions, be required to nudge their employees into taking out some cover?

The idea was gaining traction at the Group Risk Forum. A poll of 43 advisers at the event found 80 per cent supported the idea of auto-enrolment for sickness protection – a near-reversal of the position last June when 88 per cent were against  the move.

In a session headed Group Life in the Auto-Enrolled Era, Ellipse chief executive John Ritchie focused more on the idea that group risk products themselves would become auto-enrolled, recommending his audience to put money on this happening.

In his view, two statistics from the Association of British Insurers’ recent paper, Welfare Reform for the 21st Century, proved why it was inevitable: each year, one million people are unable to work for four weeks or more due to illness or injury, making it “quite a high-frequency risk”; and each year, 250,000 people permanently drop out of the workforce due to illness or injury.

Ritchie said: “In the next Parliament, there will be an unprecedented change in welfare provision so we’ve got to be ready strategically, operationally and tactically. The pensions industry has been turned on its head during the past 18 months so this stuff can change quite quickly and the Government will get out of long-term sick pay cover just as it has got out of pensions. The big question for us as providers is: are we going to fill that gap?”

In the panel debate on The Future of Group Risk, Ritchie elaborated. “The pensions industry didn’t engage sufficiently on the developing pension compulsion of the auto-enrolment movement so, as a sector, we can learn from [that]. The pensions sector didn’t rebase operationally and didn’t invest for pension compulsion, so other new players have come in and made a business of it.”

Speaking on the panel, Jelf Employee Benefits head of benefits strategy Steve Herbert agreed. He said: “The pensions industry was in complete denial about something that was obviously going to happen. It should have led the debate, and income protection providers should lead the conversation, not just react.”

O’Donnell, also speaking from the panel, admitted to “not being a great fan” of auto-enrolment. He said: “I talk to pensions providers and they are not making any money and the amounts saved are small. So it’s questionable whether it will make any real difference to the pensions gap.”

But Ritchie pointed out that, while auto-enrolled workplace pensions may not be purchasing worthwhile funds for people in their forties and fifties, it was important to look longer-term.           

He said: “In Australia and New Zealand, where there is equivalent virtual compulsion in pensions, they have contributions of 9 to 12 per cent, and we will get there. Most experts predicted large dropout rates from UK pension auto-enrolment and we have a tendency in our industry towards gloom and helplessness. But we are not doomed and helpless; we just need to be ready.

“The type of structure that may come under auto-enrolment to workplace sick pay could be employers being obliged to take the first two or three years of the cost and then employees picking up the long-tail long-term sickness. Auto-enrolment to pensions is a cost-sharing mechanism and you could have something like that.

“It’s a tough one to say ‘I’m going to insure someone for the whole of the rest of their working life,’ as I don’t think that’s the psychological contract any more.”

Regardless of whether auto-enrolment for group risk products materialises, auto-enrolment for pensions provides big opportunities for putting across important protection messages.

O’Donnell said: “At Unum, we are investing heavily on the intervention side but we notice, even with incumbent clients, that when we start talking about our services, they have no idea we have some of these things.

“Pension auto-enrolment provides a massive opportunity to bring it all into the conversation by positioning
it alongside staging. Talk about well-being and highlight the cost and the free provider help.”

Adviser straw poll

1. Has a focus on auto-enrolment reduced your employer clients’ interest in employee wellbeing?

Yes, but only slightly   57%

Yes, significantly        10%

No      33%

 

2. As Britain’s workforce ages over the next five years, do you think demand for health and wellbeing products and solutions will…

Increase slightly        36%

Increase significantly            53%

Stay roughly the same          11%

 

3. What do you think are the barriers to employers doing more to support employee wellbeing?

Awareness of the issue         23%

Awareness of the support
systems available      12%

The cost of rolling out support systems     53%

Confidence in engaging employees
on the topic    12%

There aren’t any barriers                0%

 

4. How do you perceive your role as a group risk intermediary?

To select and rebroke insurance products at renewal to get the best and most suitable deal for your client                      12%

To offer consultancy services to enable employers to improve productivity by managing health, wellbeing, absence management and reward proposition    88%

 

5. How would you rate the split between prevention and intervention in your clients’ benefit offerings?

Too much prevention, not
enough intervention 23%

Too much intervention, not
enough prevention   59%

About right                18%

 

6. Do you support the idea of auto-enrolment for some form of sickness benefit protection?

Yes      80%

No       20%

 

7. Do providers need to do more to
support advisers in having the right products and evidence to make health and wellbeing solutions attractive to employers?

Yes      85%

No       15%