A matter of priority

Challenging economic conditions, strong competition for essential skills and the current predicament of the NHS, make for a potent mixture. Put another way, how do you cost effectively retain the people your business depends on and how do you keep things going when health problems arise?

These are similar questions to those faced traditionally by larger companies who have tended to include private medical insurance (PMI) and assistance programmes as standard elements of their employee benefits package. Nowadays the place for PMI within all businesses has become one of necessity, rather than just a sweetener to lure the best people.

Small group PMI only differs from larger schemes in that the risk assessment of the plan is treated in a different way, taking into account a smaller number of people and different employee needs. A small business looking to offer PMI should find a provider that offers risk strategies for all sizes of group scheme and can take into account changes in company structure should they want to renew and update a current scheme.

The most important factor of any PMI scheme for a small business is flexibility ' the flexibility to enhance cover to meet individual needs from a balanced and comprehensive plan, and to allow benefit levels to be tailored to meet the cost and cover objectives of each group. Not all providers offer the same flexibility and most small businesses should be offered a clear choice of the market to see the differences in approach.

One of the main contributing factors to the steady growth in small group PMI over the last couple of years is the fact that many businesses are now beginning to reconcile the cost of providing PMI against the cost of not having it. In the past PMI was seen as a luxury benefit, but these days it is fast becoming a benefit that is central to the success of a business and linked directly to profitability.

Most companies, especially smaller ones, would like to think the growth in PMI is linked mainly to a more responsible and caring attitude of employers towards employees. This may be the case, but clearly businesses have to weigh up the commercial benefit of having such a scheme ' they are now doing this and the books are coming down in favour of offering PMI.

Keeping staff healthy

Getting people back to work quickly is clearly the business driver behind the installation of PMI. The current difficulties faced by the NHS with treatment waiting lists getting even longer, is a clear indicator that to help employees back to work sooner, the availability of PMI is crucial. It is critical to the health of the business and the individual.

Recent research by the Confederation of British Industry (CBI) demonstrates just how costly sickness absence can be. The staggering sum of £23bn in costs to business and Government through sickness has been apportioned to the current healthcare system's delivery. The cost to business is £11bn and the CBI report clearly recognises that the health of the population has a direct influence on business. It would seem logical to make this connection and as SMEs account for approximately 55% of the UK's private sector workforce, the cost to SMEs is significant. SMEs account for almost 50% of the nation's turnover and 99% of the UK's businesses. As such they represent a very lucrative market and their success is vital to the economy ' as well as their own prosperity.

Leaving the hard-nosed business benefits aside, there are more employee-focused reasons for companies, especially smaller ones, to offer PMI. From an employee perspective, PMI has tangible benefits for employees that are more likely to be related to and used in every day working life, rather than in retirement like a company pension scheme. The reassurance offered by PMI is of personal well-being and peace of mind for both employees and their dependents.

There is obviously a strong case for many small businesses to consider offering PMI both in terms of business benefits and employee well-being. However, one of the most confusing aspects for many choosing a small group PMI scheme is the range and sophistication of schemes on offer and the range of benefits they supply.

PMI can be seen as a core basic in terms of employee well-being solutions. If a company is starting out on the ladder of employee benefits, a simple but flexible PMI scheme should serve as a starting point to an overall well-being plan. At this stage there is probably no need to branch out to other benefits. As the company grows, however, so should the plan ' expanding to fit in with developing employee needs so, for example, you may choose to vary the range of cover across the workforce. The role and how it fits within the business will determine the range of PMI benefits selected and therefore provide the most appropriate cover.

The nature of insurance is developing, adding value is becoming more and more important. The availability of helplines providing advice and counselling can often help to add the value to the client in the short term and in many cases help problems in the long term.

With this in mind, the longer-term picture for small group PMI is encouraging with the likelihood that employers will continue to see clear benefits of offering PMI to employees ' but there are external influences that are hindering take-up.

Over the short term, with recent concerns over economic uncertainty, many companies thinking of starting a new PMI scheme may decide to tighten their belts and postpone offering this benefit.

Although companies with PMI are unlikely to cancel their scheme unless they go into liquidation, those that survive will be looking for schemes offering flexible benefits that can be changed to suit the company's financial situation. The likely effect of this on the mid-term future of small group PMI will be a steady growth in existing schemes and a slowdown in the take-up of new start up schemes.

Longer term the picture is much more encouraging. With an ageing population and a growing realisation that the NHS is unlikely to exist in its current form, increasing numbers of employers will offer PMI as a benefit to employees to ensure businesses success. It is impossible for employers and employees to ignore the crisis in the NHS and although this is unlikely to be a determining factor in the growth of the sector, it will certainly be key to the decision to buy PMI in the future.

Cost versus benefit

When speaking to small businesses about a PMI requirement the 'show me the money' question is best prepared in advance. As discussed, there are clear cost versus benefit ratios that can be used to give businesses a clear indication of the business benefits of any scheme. Consider how long someone may be off work due to a knee injury without PMI. If the individual is a key sales person, the cost of their time off work will be much more than their salary. Compare this with the cost of a PMI policy and undoubtedly a cost benefit will be seen.

But remember, always offer clients a tailored choice ' all small businesses are different with different needs and cover requirements. Spending time getting to know the business and offering a tailored solution is well received. This approach adds value to the client and builds the relationship.

Flexibility is also vital ' small businesses need to be given a choice of flexible plans that give them the option to expand and contract any PMI scheme. In today's uncertain economic climate this is essential.

Continued service and well-being options means inevitably businesses grow. Demonstrating a high level of business understanding, coupled with a well-being plan for a growing company, can be crucial to the ongoing advice to the business.

So, the prospects for small group PMI providers are attractive and that has to be good for small businesses as competition drives more innovative and customer-focused solutions. This, of course, will highlight the need for high quality advice.

Chris Jones is head of business development at Royal & SunAlliance, Healthcare & Assistance