Personal accident, key person cover and short-term sick pay solutions should all form part of the holistic risk adviser’s toolkit argues Edmund Tirbutt
From personal accident insurance to key person cover and short-term sick pay solutions, group risk intermediaries seeking to boost income streams have the opportunity to get involved in a range of other health-related products. Yet to date, a large proportion of intermediaries appear to be overlooking these extra opportunities.
For those consultants and advisers looking to cast their revenue net wider through adding more strings to their bow, the task is only being made easier by technological advancement.
Ellipse chief executive John Ritchie says: “Digital solutions might now make things possible that wouldn’t have happened before and the smart group risk advisers are already using digital techniques in practice and delegating a lot of routine work to clients and providers, so I don’t see why they shouldn’t extend the approach to newer products. Those who carry on the way they have always done are almost guaranteed a slow death.”
Keyperson insurance and other business protection cover for SMEs, where sums assured are frequently between £2m and £5m, can provide particularly rich pickings although a lengthy underwriting process has traditionally presented a barrier.
However, Ellipse is now able to do the medical underwriting for most business protection cases in around 10 to 15 minutes online. It is also developing an online financial underwriting prototype with a couple of advisers and is expecting to make this available to the market as a whole next year.
Ritchie continues: “The conversations I’ve had with group risk advisers tell me they love business protection as it gives them something else to talk to clients about, but my broader point is that the main limiting factor has been the habits and thought patterns of advisers and insurers.”
MediCheque managing director Dominic Higham has also found group risk intermediaries somewhat conservative since launching the provider’s innovative MyRecoveryCheque product (see Box) in April 2013.
Higham says: ”In my experience it can take several months to get them interested in plans. The larger the intermediary the more cautious they are at looking at any new products as they need to evaluate the positioning of the product and then undergo a lengthy compliance process. Smaller intermediaries tend to have smaller compliance departments.”
Insurers certainly have their work cut out to change such mindsets. Aviva protection solutions manager Iain Finch admits that he finds it hard to get employee benefit consultants out of their comfort zones when he talks to them about business protection.
He says: “Only a minority of those we deal with for group risk actually sell business protection as they feel it’s something that’s too technical, although the numbers have grown in the last couple of years. We provide technical back-up and you are fundamentally dealing with the same protection products as in the individual and group markets. Financial underwriting can be done over the phone and follow-up evidence can even be considered in a week in some cases. In the future I would hope that all employee benefit consultants will offer business protection as a matter of course.”
In practice, however, there are sound reasons behind this seemingly low take-up rate, and some argue better opportunities exist elsewhere. Employee benefit consultants that write significant amounts of business protection – which is technically classified as individual business – often don’t do so via their group risk departments. For example JLT refers cases to its wealth management division and Mercer to its personal financial planning division.
Chase de Vere writes business protection through both its independent financial adviser (IFA) and employee benefits arms, but is unusual in that all its employee benefit consultants are fully qualified IFAs. It points out that many employee benefit consultants at other intermediaries aren’t actually regulated to deal with individual business.
Chase de Vere principal consultant Sean McSweeney says “The vast majority of employee benefit consultants used to have IFA businesses but pulled out in the late 1990’s or early 2000’s as they saw them as being risky and non-core. I think there are other opportunities in the corporate advice world that would be more logical for them to pursue such as green car fleets and parking at work schemes, which tend to be offered via flex.”
Personal accident cover, which often gets tagged onto business travel insurance, attracts greater interest from employee benefit consultants as larger client companies frequently view it as a way of offering a high perceived value at a low cost. Whilst the restricted nature of the cover has traditionally carried the risk of problems occurring at the claims stage, there is a growing consensus that this should not be an issue in the group market as long as cover limitations are adequately explained at outset.
Mercer estimates that the majority of its clients probably have personal accident cover, typically at a level of three times salary – which tends to cost around 0.1 per cent of salary. But, once again, it isn’t always group risk consultants who are handling the cases. Because it is technically a general insurance product, Mercer does some of this business itself and some via its sister company Marsh. JLT now recommends virtually all personal accident cases to its general insurance side, handling only historical policies in the employee benefits division. That is not to say, however, that those intermediaries that do not have such clearly demarcated divisions are not showing interest in a potential new market.
The fact that most group risk insurers don’t actually provide personal accident cover does also reduce the involvement of group risk intermediaries, but Zurich, which does offer it and is trying to get away from thinking in product silos, reports greater recent interest.
Zurich Corporate Risk propositions manager Nick Homer says: “The intermediary shift we have seen is traditional group risk intermediaries and employee benefit consultants showing more interest in personal accident and business travel. The large employee benefit consultants have started talking about these products with their customers in the last couple of years whereas before that they tended to be the preserve of general insurance brokers. The key shift is people recognising that we shouldn’t just be trying to promote products and benefits but that we need to talk holistically about the risk landscape.”
Sick Pay Insurance
Not surprisingly, however, current group risk intermediary interest in fringe products has been greatest in Unum’s sick pay insurance because of its significant synergies with group income protection. The product, which was launched whole-of-market in June 2013, is designed to complement both existing short-term sick pay schemes and income protection schemes and pays a regular monthly income if employees are off sick for up to 12 months.
Unum head of proposition development Andrew Potterton acknowledges that the advent of employers losing the right to reclaim Statutory Sick Pay costs this April has probably fed demand but feels that the fact that auto-enrolment is now done and dusted with many companies has been a bigger driver.
He says: “All the top 15 employee benefits consultants we deal with for income protection are interested in sick pay insurance and many of them have already done business. Interest has increased noticeably since the beginning of the year, probably because they have been finding time to talk about it since putting auto-enrolment to bed. A good half dozen intermediaries we are dealing with have it for their own employees.
“We are possibly a little behind where we intended to be but the product is clearly here to stay and will attract competition at some stage, which is likely to prove healthy, and we have noticed intermediaries have started to package sick pay insurance with other products like cash plans and even private medical insurance.”
Nevertheless, some employee benefit consultants insist that advising on wellness should be a higher priority than trying to interest clients in yet another insurance policy.
Aon client director John Russell Smith says: “The first point in selling anything in a regulated environment is establishing a need, and with most clients the most immediate need will be prevention as opposed to generating cash when employees are absent short term. Intermediaries who think otherwise are probably motivated by commission.”
A New Short Term Sickness Absence Product
Although certainly not a direct rival to Unum’s sick pay insurance, MediCheque’s MyRecoveryCheque provides an interesting alternative for employers who want a short-term sick pay scheme at an affordable price. Premiums, which depend on a policyholder’s age and the cover level chosen, vary from £2.76 a month for Level 1 cover for an 18 year old to £21.76 a month for level 4 cover for a 40 year old.
Launched in April 2013 and re-launched this June with more competitive rates and higher benefits, the product covers absences following an operation or medical procedure by providing a cash benefit linked to the normal recovery time for that treatment. Each operation or medical procedure is allocated into one of four classifications ranging from absences of up to just a few days to those of many months.
JLT Employee Benefits principal, healthcare and risk Nick Boyton says: “It’s a good development in the marketplace, providing a further option and giving people different ways of controlling costs. It doesn’t cover stress-related illnesses or the less severe musculoskeletal injuries, so it is addressing a slightly different need to the Unum product and is approaching things from a different angle.
“Although the product literature suggests it’s competing with income protection, it seems to be more about medical procedures and focuses on average times people are off work for as a result of certain types of conditions. But for income protection the whole emphasis is on why a condition is stopping you working and not on what it is.”