Jason Green says auto-enrolment has distracted us for long enough and calls for a refocusing on group protection.
Having spent many years reviewing and evaluating the workplace savings market, over the past couple of years I’ve noticed that group protection seems to have been side-lined somewhat.
It’s become a second-class citizen, playing second fiddle (at best) to its group pension cousin.
So what is the cause of this, and why are group risk take-up rates within employee benefits so low?
Priorities and cost
The obvious reason is there that has been a new shiny thing in the corner called auto-enrolment that has been distracting everyone for the past few years.
Businesses have been so busy complying with legislation and regulation, not to mention the increased costs, that they have understandably taken their eye off the protection ball.
Another reason for low take-up may be cost. With increasing overheads, cost is always going to be a factor for employers, even more so post auto-enrolment. So if that is true, and cost is a factor, the major task facing advisers will be in demonstrating the value of group protection to employers, at a time when they are managing restricted budget spends.
A challenge indeed! Undoubtedly, group risk forms a key part of any workplace benefits solution, but it is clear that only employers who really care about their employees’ welfare (and I mean all of their employees, not just senior members of staff) will buy into the benefits of a group protection policy.
Let us start with the premise that there is unquestionable value in protecting one’s financial wellbeing. If you agree with that, and it’s hard not to, then the ‘value’ is obvious.
And if the value is obvious, the only logical explanation for low take-up of group risk is that the value has not been communicated to the employer in a sufficiently compelling way and so the people who actually need the protection aren’t even aware of it.
Something is going wrong in the supply and demand chain.
The benefits of group risk have been well publicised, and the work carried out by Group Risk Development (GRiD) has highlighted the success of claims paid with £1.24bn paid out in 2013 (the last available reported figures).
Market advances in the group risk world are somewhat fewer than that of their cousins in the group pensions and wider workplace savings arena, but they are happening.
Most of the product development in this area has focused on early intervention, faster claims payment processes and Employee Assistance Programmes (EAPs).Some providers are using technology to help streamline workflows and automate processes by removing themselves and allowing the adviser to do more, but this is not the case for all.
Group protection policies are complex designs that offer a range of attached services and features. If looking at critical illness specifically, for example, a policy will be designed to cover 40-plus conditions to cover most possible events.
According to GRiD, cancer was the main cause of claims in 2013 accounting for 69% of all group critical illness claims paid.
In January 2015 Friends Life launched its Group Cancer Cover policy, which is an employer funded cancer specific workplace benefit. It’s my understanding that this is the first cover of its type in the UK directly offered via the employer, however similar products are available to individuals such as the AIG Direct Cancer Cover Cash Plan.
Group Cancer Cover from Friends Life is designed for employers with 100 or more staff and will pay a fixed amount of £25,000 to employees who are diagnosed with cancer (although not all cancers are covered), to assist with the additional costs that people will face while going through cancer treatment.
The product is typically offered at 70% of the cost of a standard group critical illness policy, requires no medical underwriting and the only exclusion is to people who have been previously diagnosed with some form of cancer in the past.
Friends Life says: “The reaction from the market to Group Cancer Cover has been really encouraging, which shows that we have developed a product that can really help businesses and their employees.”
If such policies can enable providers to offer cover for fundamental conditions at more appealing costs to employers, this is a positive step forward for the group risk industry as a whole.
Now that auto-enrolment is a more established part of the workplace landscape, perhaps we should re-focus our attention on the overriding principle of financial wellbeing: Protect what you have and grow from there.
So let’s acknowledge that the shiny thing in the corner has distracted us for long enough. Let’s refocus our attention on getting employers and employees re-engaged with group risk. It has been in the shadows for too long now. Let’s celebrate some of the innovation we’ve already seen, and let’s demand more of it.
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