With economic concerns putting the ever present issues of cost and usability even higher up firms’ employee benefits agenda, dental schemes are emerging as an option which can deliver on both fronts.
Initial results from Denplan’s latest Dental Benefits Survey, shared exclusively with Health Insurance, show more employers are considering introducing a dental scheme than any other benefit this year, and both providers and intermediaries agree opportunities are rife in this market.
But how can brokers tap into this business potential and turn a low premium product into a lucrative revenue stream?
“The feedback we have had is that employers are looking to introduce dental schemes because if they have not been able to offer pay rises they want meaningful employee benefits which they can see staff are using,” says Colin Perry, corporate channel manager at Denplan.
“Dental plans are used on a regular basis, whereas other benefits such as private medical insurance [PMI] will never be used by lots of employees.”
It is a view that intermediaries echo – Ronjit Bose, commercial director for employee benefits at Jelf Employee Benefits, says the firm is looking to expand into this market as dental plans are low cost but highly valued.
“Historically, Jelf has only done dental at a fairly low level as we tend to focus on the core products around PMI,” he says.
“But dental is a market we would really like to explore further and expand in because it is in demand from employees and they value the product very highly.”
Bose adds that market penetration for dental is still relatively low – Denplan’s survey shows 21% of companies currently offer a dental plan – meaning potential business is plentiful.
What is more, Denplan’s research shows that of those firms not currently offering the respective benefit, 32% are considering introducing a dental plan this year. The next most popular options are gym subsidies, critical illness cover and health screening at 20%.
Michelle Rae, product manager at CIGNA Healthcare Benefits, is also keen to emphasise that demand for dental is being driven by employees.
The results of a poll of over 2,000 workers carried out by YouGov on behalf of CIGNA UK, published last month, show that close to a third of employees who are not offered access to a dental plan through their employer would like to be.
“We have done a lot of work looking at consumer attitudes to corporate dental plans, which has given us a good steer on the fact there is definitely demand out there from employees,” says Rae.
“What is going to drive this market forward is demand from the people who are actually using the benefit and so that is where we have focused our efforts.
“We believe there is significant potential for brokers to tap into this market, and to do so successfully they need to get the message across to employers that this is a benefit employees rate very highly.”
And when it comes to which companies intermediaries should be targeting in particular, industry commentators are unanimous in the view that the field is wide open.
“There are lots of different means by which employers can fund dental schemes, all the way from a voluntary scheme where the employee pays on a direct debit basis, to a scheme which is 100% funded by the company,” explains Perry.
“Therefore there is no size of company which could not take out a dental plan because it is too expensive or too much work to implement. The voluntary direct debit option can be put in place without the employer having to get too involved.”
Charlie MacEwan, corporate communications director at WPA, the insurer, adds: “I would say that in this market every company is an opportunity. I think you limit your focus at your peril.”
CASH PLAN COMPETITION
But while potential business is certainly out there, brokers looking to get into this market may have to aim for high volume in order to make the commission viable, while they also have to consider alternative benefits such as health cash plans.
Mike Blake, director at PMI Health Group, the intermediary, describes the corporate dental market as “patchy”, noting that dental schemes lack the sickness absence credentials of other benefits like gym subsidies or PMI.
“Some employers might offer a dental plan for altruistic reasons and because they want to have a high level benefits package, or in response to employee demand,” he says.
“But for companies to have a business reason for introducing a scheme is a bit tricky. The downside of not offering a plan is not great enough for employers to introduce one, as employees are unlikely to take long periods of absence due to dental problems.”
Denplan’s survey, however, ranks dental plans relatively highly for employee wellbeing.
Company decision makers put the benefit third highest for enhancing wellbeing, behind gym subsidy and health screening but ahead of PMI and cash plans And despite his reservations, Blake says he expects the dental market to grow, with the main areas of expansion coming from flexible benefit programmes and smaller employers.
Others argue that faced with a choice between a cash plan and a dental scheme, employers would opt for the former as it offers cash back on a host of other treatments in addition to dental, such as optical and physiotherapy.
“We are selling a lot of cash plans in the corporate market at the moment, because their perceived value among employees is incredibly high, as they span several different areas of treatment,” says WPA’s MacEwan.
And Bose says that as the cash plan market evolves, this will inevitably chip away at dental plans’ potential customer base
“A cash plan puts another option on the table,” he says.
But CIGNA’s Rae says the two products are very different in terms of the level of cover they provide.
“The big thing concerning consumers at the moment is affordability of treatment, which includes fillings and more complex procedures as well as check-ups,” she says. “A dental plan will provide a meaningful contribution to higher level treatment, whereas a cash plan is much more targeted towards everyday costs and is likely to only pay for a few hundred pounds worth of treatment a year, which could be wiped out in a few appointments.”
Carl Eaves, northern region sales leader at intermediary Oval Healthcare Limited, agrees that there is a world of difference between a cash plan and dental insurance. But he says that while many employers would like to offer a dental plan, price often gets in the way and they end up taking out a cash plan as it is the more affordable option.
“We definitely feel the dental plan market is an area of growth, especially within flex benefit programmes, but there is still a differential between how much cover employers want and how much they can afford,” says Eaves.
“We see a high level of interest in dental schemes from employees, which filters through to employers, but when they see the premiums that is where the conversation can sometimes stop. So for those who want to do something on dental, a cash plan is often the starting point.”
Eaves says that in the dental market, cost of premiums is a crucial issue, as from a commission perspective they are relatively low, but from an employer’s point of view can seem expensive considering they only cover one aspect of employees’ health.
Other brokers agree that commission levels for dental schemes are low, and therefore advisers may wish to focus on volume or sell dental alongside other benefits in order to maximise profitability.
Denplan’s Perry says he recognises the challenge this presents.
“If you’ve got 100 people on a PMI scheme at £80 a month compared to a dental plan at £10-15 a month, obviously the commission on PMI will be a lot higher,” says Perry.
“That is a challenge for us, but because brokers are already having conversations with employers about other benefits, this is something that will be easy for them to bring into the conversation.”
And it seems that firms certainly value the services provided by intermediaries, with Denplan’s survey showing that 87% of corporate decision makers using a broker agree they deliver value for money.
Brokers are most valued for their skills in negotiating deals, providing an impartial market review, and providing expertise not available within the company. So while dental plans may have their drawbacks, the overriding message is that this is a growing market with plenty of opportunities, and firms are keen to work with advisers to put schemes in place.
“This is a product that is used by employees and is not difficult for intermediaries to sell,” says Perry. “Yes the commission is lower, but there is still good money to be made.”