Dependency culture = risk opportunity: Canada Life round table

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As the Government shifts responsibility for workplace health and protection to employers, the corporate adviser’s role will evolve into managing these risks on their behalf. John Greenwood hears how

Employers, advisers and providers all require a macro-level understanding of the changing dynamics of the UK workplace if they are to manage the risks posed to them and maximise the opportunities.

That was the conclusion of Corporate Adviser’s September roundtable – Redefining Corporate Advice: Building Sustainable Models – held in Edinburgh last month.

Delegates at the event, held in association with Canada Life Group Insurance, predicted the Government would gradually transfer responsibility for workplace health and protection from the state to employers in a similar way to that employed for retirement, the flat-rate state pension and auto-enrolment. Forward-looking employers should therefore adapt their businesses to the new world of self-reliance, or employer reliance.

JLT Benefit Solutions head of health & risk Adrian Humphreys said: “How else are we going to get the economy balanced when you have this great big NHS saying ‘More, more, more’? Pensions was the crack that opened the door to where we move from the Government supplying everything to your employer supplying everything.

“And what will be next? Life cover, PHI and, last of all, PMI. Because the NHS is the big shibboleth that cannot be attacked. And the consultant or broker of the future, call them what you will, will give much more advice in the round than they do at the moment.”

Scottish Widows protection specialist Johnny Timpson argued that the Government was already moving in that direction.

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Timpson

He said: “We are in the midst of the biggest welfare reform change since [William] Beveridge.

“The DWP is currently emailing the vast majority of working-age families to say that their benefit is changing and is going regional. We have already seen mortgage benefit change, and more changes are coming.”

State benefit changes

Changes to state protection benefits not only create greater demand for private-sector protection products – most effectively delivered through the workplace – but also present clear consulting opportunities for advisers. But these opportunities to demonstrate expertise and add value are not always taken up by intermediaries, according to Canada Life Group Insurance marketing director Paul Avis.

Avis said changes to Employee Support Allowance and the Work Related Activity Component were a case in point.

“In April 2017 the WRAC element of state benefit support disappears,” he said. “We have a welfare reform page on our website that explains everything an adviser needs to know about it. So every scheme that is 75 per cent minus ESA and WRAC needs a review.

“And by the way, who can live on £3,800 a year? There should be press coverage of the fact that state benefits have just gone down by 30 per cent and half of schemes need to be reviewed. We started quoting 75 per cent minus ESA and WRAC and 75 per cent flat, and 75 per cent less ESA plus support component – giving advisers three quotes. But no advisers are going to their clients and saying: ‘Forget state benefits. De-link your group income protection from state benefits.’”

He adds: “This is just one of the consulting points that should be being made.”

Avis also expressed surprise at the extent of the untapped consulting need relating to lack of adaptation to take into account the default retirement age exemption, which came into effect in 2010.

“Unbelievably, only 11 per cent of our group life by lives go to 65 or state pension age. Things are better on GIP, where the figure is 42 per cent. We still have net pay schemes, integrated pay schemes, LTIB schemes that went down in 2007. We still have schemes that have got female cease ages of 60 and male cease ages of 65. The consulting and proactive use of data through the current distribution channels is not happening,” said Avis.

While advisers may be missing opportunities to add value and make benefits fit for purpose, experts at the event argued that the industry as a whole needed to do more to reposition the public perception of protection.

Financial services marketing consultant Roger Edwards said: “The fact is the public still do not engage with protection. We have a massively tarnished reputation for all sorts of reasons.

“The Daily Mail will still write articles about claims being turned down and, even though the industry has created a scenario where the percentage of claims being paid is in the high nineties, the perception remains. That is a massive problem that will not take five minutes to solve.”

He added: “Creating the buzz around the coffee machine is key. Protection does not create a buzz with people, but possibly the way to create that engagement is through health and wellbeing. The question then is: how do you make that attractive for the employer? And how can a story for the adviser be created to present that?”

Timpson said: “I have been speaking a lot with advisers in the United States, where the workplace is seen as the place to engage. In the UK, we have been designing products for ourselves, not for the customers. And we are not talked about because we do not engage. We do not send out annual benefit statements and wake-up packs.

Collaborating with charities

Timpson argued that the industry could do more to engage with charities – which have historically been suspicious of the industry – to get their message over. Advisers too could use them as a free resource for employers’ benefits packages.

Timpson said: “A key component of the success of Seven Families was the collaboration with Disability Rights UK. The charity sector had always stayed away from our industry; they didn’t trust us. Some had political agendas, but the likes of Macmillan and British Heart Foundation and others, want to engage. They have been smart with their awareness calendar, they have all got very sophisticated social media programmes and they are desperate to break into the workplace. And they are looking to provide support services that you can wrap around the group claims process, to partner with the group risk industry and augment services at no cost to the employer.”

Edwards said: “At least the group protection market is increasing – everything else in protection is bombing.

“You could argue that part of that increase was the engagement with the Seven Families campaign – the telling of stories of real people through video. It wasn’t product push, it wasn’t complicated, it wasn’t technical. It was real people telling stories of how they had been facing financial hardship after being ill and how the income protection payment rescued them. And that storytelling has had an impact on the markets for income protection.

“So how can we make that so much bigger? It comes back to the buzz around the coffee machine.”

Delegates even suggested a Seven Employers campaign, highlighting the impact on employers of offering workplace protection, which could help increase understanding of what the industry delivers.

LEBC senior financial planner Jaffray Weir suggested the industry could do a better job of presenting what it could offer employers, using a simple-looking form that could help them with their problems.

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Weir

He said: “They feel embittered because they are taking on AE – they see it as an added hassle. They don’t get the big-picture view that they are part of a broad policy drive. They do not understand it, or the value it brings.

“Employers don’t go into business to look over their shoulder worrying about all this HR stuff. They want simplicity. So maybe the industry should set up a proposition, package it and say ‘We will look after you,’ every three years, and also do a cost-benefit analysis to show why it helps their business. If you can do a gap analysis of what their cost of absenteeism is, deaths, getting people back into work, and show them what it is costing them each year, they would find what we do easier to engage with.”

Timpson agreed the demand existed from employers. He said: “We’ve got people like the Federation of Small Businesses saying the Government has passed the buck on pensions, statutory sick pay, maternity and paternity pay, workplace agility and disability support, and back-to-work management. They are saying they just can’t cope and need somebody they can sub-contract all those services to.”

Productivity

Demonstrating productivity will increasingly form a key part of the future corporate adviser’s role, predicted delegates. Avis said: “The UK is sixth out of seven [for productivity] in the G7. If we were to benchmark against America, there would be £21,000 in additional household income from a productivity gain.

“The key strands of productivity are health and wellbeing, engaging your workforce because they like going to work, they like the environment they are in and they are kept fit, happy and productive. All the stuff in employee assistance programmes and around work/life is coming to a head. That is a consulting opportunity, and regarding the ROI issue we have a guy whose sole role is going out with advisers to talk to employers about the value of income protection to expand membership to non-insured parts of the workforce.”

Weir said: “The Government has subtly moved the goalposts to say that you are responsible for yourself after retirement. That is not a bad thing, but when it comes to income protection we need an education plan because employers need to understand the value to them as well as to the employee. We need to simplify PHI and the benefits you get from it. Simplicity is the best way forward.”

Workplace marketing, US style

Edwards pointed to good practice in the US, where uptake is much higher, for creating engagement with workplace protection. He said: “Worksite marketing is huge over there. They hold benefits days within companies and have people doing presentations about the state of the economy, health and wellbeing, and getting the employees excited about what is going on. Then they have big sign-up sessions where people queue to buy stuff.”

Timpson added that the US industry had created a calendar of ‘awareness months’. “November is long-term care month, September is life assurance awareness month, May was disability month. This is a smart way of raising awareness,” he said.

Broadstone risk and flexible benefits director Nick Boyton pointed out that the US was in a different place from the UK regarding self-reliance.

He said: “There is a big cultural difference. In the US, people understand that they need to look to themselves and their employers for support, whereas in the UK we still have this perception that the state is going to look after us.”

Boyton added: “There is also this fundamental problem that people don’t want to talk about things that they find unpleasant. We know that more people have mobile phone insurance than have income protection, which is absolutely crazy. If you’ve got a mobile phone, it is because you have got an income somewhere else.

“We are seeing with auto-enrolment a lot of financial education going on, being provided by our pension colleagues, but that should be a wider brief, saying: ‘It’s not just about your retirement wealth; it’s also about your health.’”