A shake up to the corporate cash plan market is long overdue says Ian Talbot, head of commercial distribution at National Friendly
Whilst the corporate market currently only accounts for 14 per cent of total cash plan sales, demand for company paid cash plans has increased by 73 per cent over the last few years. This is in stark contrast to the market as a whole which has dwindled over the past decade.
There has been little innovation in the cash plan market since the 1950s, when cash plans were re-invented to provide an affordable way to help fund non-acute medical expenses. But if you look at the products that dominate the market, there is little differentiation; the majority cover 6-8 core benefits, chiefly dental and optical plus a few add ons, and competition is largely based on price and is brand driven.
Traditionally, corporate cash plans have been positioned as an employee benefit and in the main this has been the driver behind organisations procuring them – to aid in the recruitment, retention and engagement of employees. But evidence in the corporate market suggests that customer needs are changing and that providers need to rise to the challenge to provide products that meet these needs.
The downturn has accelerated an already emerging cultural shift, whereby organisations are taking a more strategic approach to healthcare and seeking to demonstrate a return on investment. At a time when short term business performance has become the primary focus, spend on employee benefits is under scrutiny.
There are two key customer needs that product innovation needs to address – suitability and affordability
Whilst this would appear a challenging environment to operate in, it is also a time of great opportunity. Providers need to go back to the drawing board and put the corporate customer at the centre of the product development process. They can’t just tweak products to enhance attractiveness in the current budget-constrained climate; they must drive true innovation in the market by challenging and re-examining the traditional cash plan formula.
There are two key customer needs that product innovation needs to address – suitability and affordability.
Utilising cash plans purely as an employee benefits tool is no longer sufficient. Organisations need to demonstrate a return on investment and products need to be able to deliver a more tangible, positive effective on the bottom line. Sickness absence management is a serious issue across many industry sectors, with mental health and musculoskeletal disorders having the most significant impact – issues that any healthcare product needs to ensure it effectively addresses.
Cost of provision is another issue. For organisations with sizeable employee bases or adverse risk profiles that are looking to invest in proactively managing their health risk, private medical insurance can be prohibitively expensive. Cash plans can offer an alternative; a more affordable route to private healthcare with policies that provide elements of traditional PMI cover such as health screening or consultations.
They can also offer flexibility for businesses looking to tailor cover to suit their specific organisational needs.
The current gap in the market has already driven innovation in some quarters, with some providers reacting quickly to the changing requirement of customers. These providers have taken advantage of a conventional market place and are offering something different in the way of low cost health cover for employees. Products that allow employees to spend a greater proportion of their cover on the health treatments they utilise most have been particularly popular. For instance, products that offer cover for more frequently used benefits such as dental treatment rather than covering lesser used benefits such as chiropody, have seen a surge in demand.
This is a much needed development in the market and, if other providers want to compete for business against these new style plans, they will need to introduce products that can offer an alternative to the traditional cash plan and provide the customer with more usable benefits.
Even when the economic climate improves, companies will struggle to justify spending money on products that do not offer them above and beyond what they previously expected from their benefits, especially their healthcare. Providers need to ensure they are keeping up with this demand and are ready with products to match this.
For any business in a time of economic pressure, the most successful companies are those that are prepared to review and adapt their business model, and adapt accordingly as the market and needs of the customer change. Cash plan providers need to ensure they are not left behind.