Group risk markets have a bright future, but, says Lee Watson, risks of getting quotes and applications wrong are increasing.
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Employers must be aware that seconded employees (either temporary or permanent) have to be:
• in receipt of a contract of employment with the policy holder (or participating employer), and / or,
• classed as a relevant UK individual as per the HMRC definition.
Absence from the normal place of work is commonly overlooked when establishing or transferring cover.
Accurate information is not always available as its significance is rarely appreciated. Some employers may not have an absence policy or a simple way of recording and reporting absence.
Insurers always attempt to avoid anti-selection and get very nervous when clients “forget” to inform them of eligible membership changes. All excluded employees must be disclosed with a valid reason.
The way employers and intermediaries record details of eligible employees will determine those who are either approaching or have exceeded the lifetime allowance and therefore may choose to be excluded from the death benefit scheme.
Educating employers is important so that they appreciate death claims for employees who are either based or travel overseas will be subject to the UK’s guidelines on foreign travel as published by the Foreign & Commonwealth Office.
It is vital that employee data matches eligibility exactly but it often contains employees that are too young, too old or who are just simply not eligible. Employee validation is imperative before submitting a quotation request to the insurer.
• Data Protection
Information security will always be a prominent subject with our industry; the Information Commissioners office has the power enforce fines of up to £500,000. Browse options will remove the need to establish secure data transfer links (secure email links, TLS etc) which need maintaining, auditing and therefore inefficient.
• Management information
Like Data Protection, record keeping is another subject which generates many different opinions. Keeping accurate records in a single place enables management information to be readily available e.g. sales initiatives, peer checking or for compliance purposes etc.
• Compliance
Compliance can also help win business by helping to mitigate liability by auditing and approving a management system which enables our highly technical industry to be managed efficiently.
Adopting a standardised process will help sales, and compliance can be a part of this process by monitoring remotely. Clients will appreciate and be reassured by the Compliance Departments’ involvement.
Adopting a system, customised by the intermediary, that enables efficient access to either whole of market, limited panel or even tied agency will help improve efficiency via a consistent and standardised approach.
By consulting and administering group risk schemes on a clients’ behalf, the intermediary is expected to consult, be organised and mitigate shortfalls in cover as soon as possible.
The intermediary is ultimately liable for this advice and, even if it is right, the employer will always have the final decision.
Employer considerations
With all this in mind, intermediaries and employer need to consider whether they are currently:
• Giving insurers accurate and complete information and data at all times.
• Maintaining a death benefit discretionary trust, ensuring that the trustee name is correct and that this represents current legislation.
• Liaising with the HMRC to ensure death benefits in the event of a claim will be paid free of inheritance tax.
• Mitigating shortfalls in employee cover by actively communicating with the client.
• Proactively maintain consultation and administration competency.
• Negotiating the best deal for the policy.
Standardisation via a consistent, intelligent, efficient and secure system will position the employer and intermediaries perfectly for auto-enrolment and the constant challenges. n
Lee Watson is managing director of Group Risk Connect
