Thinking inside the box

Unum should be applauded for bringing the protection message to the TV screen says Simon Derby, director, i2 Healthcare

I have been trying to get my thoughts together regarding what will happen to UK plc once the Government cuts become a reality in 2011 and beyond. The effect will be felt not only by the public but also by the private sector. One thing is for certain. There could be lots of pain coming our way.

With the exception of group critical illness, premiums for 2009 are down and this will probably repeat itself in 2010 and while many of us, me included, hoped we would start to see improvement in the economy at the back end of 2010, this now seems unlikely.

So what does the future hold? The demise of defined benefit pension schemes and the flight to DC schemes will undoubtedly present some opportunities from an ill health early retirement perspective, but it remains to be seen how big these opportunities will be. Research has shown that a staggering 75 per cent of companies closing or considering closing their DB schemes have made no provision or thought about provision for ill health cover.

Most employers are happy to lose their DB responsibilities but they are not keen to add to their costs by implementing an income protection/ill health early retirement scheme to replace the lost cover. Despite the knowledge their employees could be worse off, many think the State will look after their ill health early retired employees.

There is also another twist in the pension saga – the government’s drive to make pensions compulsory for all, albeit with an opt-out option, with employers being required to make a contribution to an employee’s fund. This cost is bound to have an impact on an employer’s views on providing group risk benefits, whether they are existing or new benefits.

We also have the shadow of the default retirement age looming large, which if the Government gets it wrong could decimate the risk industry as we know it at a stroke.

The shadow of the default retirement age looms large, which if the Government gets it wrong could decimate the risk industry as we know it at a stroke

It is fair to say that many employees do not realise the value or the existence of group risk products, and why would they, as research has shown that nearly a quarter of employers surveyed did not understand group risk benefits. Our other problem is one of employee perception. Where benefits are in place are they valued by the employee or would they rather have a better company car or some other tweak or upgrade either status or salary related to their employment package?

Group risk will be under continued pressure from a cost, importance and perception point of view for some considerable time, until we take our story to the masses and spread the words – income protection insurance, life insurance and critical illness insurance all available via or from your employer.

There are threats and opportunities within the group risk arena at present. Threats include the aforementioned retirement age changes and compulsory employer pension contributions, while opportunities such as ill health early retirement remain.

But I still believe our biggest problem is not engaging the masses, the employees, the end users who in most cases have little or no knowledge of group risk benefits at all. And nor, in reality, do some employers.

But this lack of employer and employee perception may be about to start to change as Unum have just announced they are going to advertise on the “telly” from January 2011. I don’t know what the format or message will be, but I have no doubt it will be income protection related.

They will be joining the likes of Simplyhealth and Bupa who specifically advertise their health products and whilst both of these organisations would like all viewers to buy “their” products, I expect they are realistic enough to accept that not all new policies/schemes will come their way. But at least they may be starting a person’s thought process with regard to PMI and if they do want to purchase healthcare products they will probably get a look in. Bluntly, they can ask no more than that.

I do not think we will find ourselves up to our armpits in new enquiries with clients queuing outside our offices the day after the first TV advert has aired. But such a campaign is a huge leap forward. At least the industry is taking the word to the masses. Let’s hope they listen and act.
Well done Unum. I am looking forward to seeing the campaign and the commercial. The next step is weaving group risk products into the nation’s favourite soaps, maybe.

Who knows? This may encourage other group risk insurers to follow suit as nearly every insurer has copied the another one in the recent past – once and done underwriting, free EAP’s, higher FCL’s… the list goes on.