If 2000 was a good year for group risks, 2001 looks to be even better, on the strength of a still-buoyant economy and skills shortages that are forcing all employers to look again at their employee benefits packages.
Overarching this is a continued interest in flexible benefits schemes. These allow workers to decide for themselves the best benefits package to meet their circumstances. And we are also seeing a greater focus on sickness absence and what to do to minimise it.
More employers are now taking a holistic approach to benefits, meaning independent financial advisers (IFAs) now have to look at not just which product may be most suitable but how insurance can best fit with the employer’s strategy on sickness absence management and on employee “perks”.
Catherine Baxter, the marketing analyst at reinsurer GE Frankona, points to strong growth in critical illness (albeit from a low starting point) and income protection business (see table 1).
“Group income protection has started to grow strongly again, with lives covered up by 8.6 per cent last year,” she notes. It is too early to judge how this year’s sales will turn out but even the much-vaunted economic slowdown may simply encourage companies to look more closely at their benefits package to ensure it offers enough to recruit and retain the best staff. So far, at least, there is little evidence of any general belt-tightening going on.
Traditionally though, one difficulty many IFAs have had is that group business is a specialist sector, with its own rules and traps to catch out the unwary.
Even the apparently simple task of asking an insurer to quote on an existing scheme could see the intermediary fall foul of the UK’s complex data protection rules, with disastrous consequences.
That is because the new insurer will want to see details of the scheme’s claims experience before quoting, and that means looking at information relating to claims when the claimant’s specific permission may not have been sought. But now such issues are being addressed.
Until recently, the group risk market has not had its own voice, so practice varied widely between insurers – another factor that has discouraged IFAs from marketing group risks.
Then, in 1997, Group Risk Development (Grid) was set up “to promote the value of group protection for employees and other groups by increasing awareness and understanding”.
Grid comprises insurers, reinsurers, employee benefits consultants, IFAs and others, and has quietly but effectively been working to raise the profile of group risks – and to sort out some long-standing issues such as the data protection problem.
That has now been resolved following a meeting with the information commissioner – something individual insurers had not been successful in achieving on their own.
Key features documents have long been a valued part of individual regulated products, enabling products to be compared more easily, but there is no similar requirement in the group market.
Now, Grid has obtained agreement with insurers that, from next spring, technical guides will be available, enabling IFAs to better compare different insurers’ offerings, something that should benefit clients too. Indeed, some insurers have already started issuing technical guides.
“Another area where problems can arise in practice is that of linked claims,” says Grid secretary Ken Ritchart, who is also group risk manager at Swiss Re Life & Health.
Here, the problem is what happens when a scheme is switched but there are ongoing claims. Insurers’ practice varies: some believe existing claims remain the responsibility of the old insurer, others that they should be the province of the new.
If the new scheme has different rules, the claimant could be disadvantaged. Grid has now agreed a protocol to ensure that, where the new scheme has less advantageous terms than the old, the claimant will not be worse off.
Grid still has some way to go to achieve all its aims but, in just four years, has already established itself as playing an important role in ensuring the development of group risks.
The organisation is open to anyone to join, says Ken Ritchart, and members include all the major insurers and reinsurers, as well as a growing number of employee benefits consultancies and IFAs.
Making group risks a more accessible market for IFAs may just be almost as important as the products themselves. So, to find out more, check out Grid’s website at www.grouprisk.org.uk.