The day the cheque from the insurance company lands on the doorstep usually marks the end of a transaction between the insurance company and its customer, not the start.
A mortgage is paid, a car is replaced or a leaking roof is fixed. Job done, another customer satisfied.
But disability insurance is not quite the same. The cheque may arrive, but even though the mortgage and the bills can be paid the claimant is still stuck trying to come to terms with an often life-changing disability - physical or mental. As a result, more group income protection providers are taking an increasingly active role in establishing effective rehabilitation services. The benefits of active rehabilitation have been well-documented. It is a win-win scenario for the claimant wanting to get back to work, for the employer who has an obligation to its staff under the Disability Discrimination Act and for the insurance company as the claim period is reduced.
It is fair to say that in the public domain insurance companies are not the most loved of businesses. But group income protection providers are trying to shake off this image and are selling themselves as something more than an insurance company - as an occupational health solution to employers, providing an employer with the means to control absence in the workplace where insurance plays only a part.
Customers appear to be warming to the idea, says Brian Rawle, marketing manager at Scottish Equitable Employee Benefits.
He says: "The market has now moved and can recognise the advantages of rehabilitating staff back to work and employers are thinking seriously about loss of staff. There was an attitude that staff can be easily replaced but this is changing, especially in highly skilled industries."
However, John Ritchie, marketing manager, employee benefits at Swiss Life, says that this means a lot more than becoming involved with a claimant after, say, six months as rehabilitation becomes increasingly difficult with time. He says: "You cannot manage long-term absence without effectively managing short-term absences. We need to find out about potential claimants at six to eight weeks rather than at 26 weeks."
Managing a claim effectively means the insurance company must be adaptable and open-minded to achieve the outcome desired by all parties, adds Ritchie. He says: "There must be good communication between the employer, the employee, the insurance company, healthcare specialists involved in the case and the intermediary. This often means breaking down the conventional way of doing these things, for example ignoring customers until they claim after 26 weeks."
Nick Homer, income protection product manager at Norwich Union Healthcare, agrees. He says: "We need to stay close to each claim as each is different and we need to understand exactly what the claimant's job involves."
Once a claim is made, Homer says that a claims visitor will help the claimant with general support - for example, putting claimants in touch with relevant organisations. They will also be able to put claimants on specialist rehabilitation courses or arrange worksite assessments with occupational therapists. It is such services, says Homer, that really help employers appreciate the benefits of income protection.
"Most human resources departments have no disability experts, but insurers have access to experts that are keen to support the employee and the employer," he says.
Nick Lomas, marketing manager at UNUM, sees that claim patterns are changing. He says: "There is a continuing trend of back and heart problems being replaced by stress, anxiety and depression, which now account for 23% of all claims. Employer demands on their staff and expectations of staff are high. Businesses are working harder with increased productivity."
As a result, people are being pushed or are pushing themselves too hard and stress is the natural outcome. This worrying trend has led UNUM to work on the rehabilitation services available to stress claimants. This can involve, for example, arranging stress management facilities and offering advice on return to work plans, as a gradual return to work can be much more effective than a sudden return to full-time work.
"Once a person has been off for a year it can be difficult to get their confidence back," says Lomas.
As part of its stress focus, UNUM is also offering motivational and self-understanding courses across the country for claimants, an outsourced service provided through specialist Mark Doughty Associates. It runs group and individual sessions with claimants on week-long courses with follow-up sessions as well.
Price rises
Premiums for group income protection schemes are on the up. According to ERC Frankona's research, premium income rose by 18% last year and Scottish Equitable Employee Benefits has estimated that premiums across the board have increased by, on average, 15% this year. UNUM estimated a more conservative 10%. This has been attributed to falling interest rates which has made the cost of claim payment rise, as more money has to be set aside for this purpose since insurers are receiving a lower return on their investment.
However, Homer says that a rising incidence in stress claims has also played a part. He says: "Mental illness is one of the major causes of claim and they often turn into long-term claims."
Therefore, any moves to keep an escalating cost from rising further has to be welcomed as claims experience is the biggest driver of price on larger schemes.
Jane Dale, director of group risk at Legal & General, says: "The best way to control price is through claims management. An employer's pricing is affected by poor claims experience, so the more we can all do to improve claims incidence the better. This is why insurance companies are so keen to help employers control their claims. But this is not about pushing staff back to work before they are ready, it is about understanding the culture of the workplace and the attitude of the employer."
It is no surprise then that on new schemes underwriters will take into consideration absence management procedures already in place before setting the price. A scheme is therefore priced on much more than age, sex, benefit and location.
Ritchie says: "We need to find out the attitude of the employer and find out what they are actively doing to manage absence."
The price difference between the best and worst employers can be between 15% and 200%, so clearly less proactive employers will pay over the odds for cover.
"If employers are wasteful of their people then they will have to pay a lot for their insurance," says Ritchie.
IFAs that play a part in arranging successful schemes that impact on the employer's bottom line will reap the benefits, says Rawle. He adds: "IFAs will develop a much closer relationship with companies and more loyalty is generated from the customer to the adviser in this way."
On the whole, group income protection has had a good year and is experiencing continuing growth. ERC Frankona's research confirms that, while the number of schemes has not increased a great deal, the number of lives covered rose by almost 90,000 between 1998 and 1999. According to UNUM, the biggest growth area is in small to medium-sized businesses and since 1998 has seen sales in this sector of the market increase by 40%.
Lomas says: "Many medium-sized companies are taking out cover for the first time. The labour market is tight and as companies enter their second phase they are looking more closely at their health policies and how to retain staff. More are now reaching this stage due to the growth of internet, telecoms and changes in a buoyant economy."
This trend has been most marked in 'people' businesses reliant on a highly skilled workforce, such as technology and telecom companies, management consultants and public relations and advertising firms. Norwich Union has also highlighted the small business market as the focus of growth, believing the area presents many opportunities and that penetration is, at the moment, low. Recent research by Norwich Union, conducted among small companies, found that in 25% of companies one member of staff had been off work for more than three months.
"As this trend continues more people will see the need for income protection," says Homer, adding that changes in the pensions landscape will help intermediaries capture this market. The current trend is for money purchase schemes as we move away from final salary pensions which do not have the ill health early retirement provision that final salary schemes had. This highlights the need for additional protection alongside the pension scheme which could be provided through a group income protection policy.
The advent of stakeholder also holds opportunities for IFAs, says Lomas. When stakeholder is finally introduced all companies with five or more employees will be legally bound to offer a stakeholder facility.
He says: "Our research shows that 40% of companies with fewer than 50 staff do not have a pension scheme, but will have to put one in place under stakeholder requirements. This provides IFAs with an opportunity to completely review their benefit package and look at providing disability cover. This adds value to the sale, otherwise stakeholder becomes a commoditised issue."
But Dale suggests that to significantly grow the market there needs to be a greater level of understanding. She says: "There is a need to start simplifying the product rather than adding bells and whistles. People feel it is a lack of understanding that is hindering this product. Research has suggested that employers are interested in ways we can help them manage claims, rather than innovating the product further."
Rachel Williams is senior staff writer
