Group Risk Development updated its statement of best practice for supplier agreements in response to an increasing number of employers devising their own contracts.
Grid says it has seen more employers proposing their own supplier agreements as well as non-disclosure agreements, data-processing agreements, and service-level agreements, in addition to or instead of the insurance policy itself.
Grid has reiterated to its members that these are not usually appropriate for group risk business and that the policy document itself is a sufficient contract.
This updated statement is aimed at giving confidence and clarity to insurers and intermediaries when employers are purchasing a range of group risk products. It also offers guidance to help intermediaries communicate how group risk insurance operates in the UK, with specific reference to both financial services law and regulation.
The document also explains that the internal governance policies and practices of insurers are designed to cover typical employer concerns, namely issues such as bribery, conflicts of interest, modern slavery, IT security, and confidentiality.
Grid points out that as the UK’s insurance sector is already a highly regulated industry with significant levels of protection embedded, employers can be confident that whichever insurer they select, they will be covered by the same rigorous industry standards.
Grid chair Paul White says: “It is reasonable that any company purchasing a product or service wants to protect itself, and ensure that the organisation they are purchasing from acts in a responsible manner should an issue arise. However, it’s important to realise that the group risk insurance industry is already highly regulated, and employers, therefore, do not need to add in an additional layer of contractual obligations.
“We believe that additional supplier agreements, which are often better suited for other products and services, are not necessary when purchasing group risk insurance because a policy document itself gives all the reassurance and protection required. Any other agreements could make it difficult for the insurer to carry out its normal activities in connection with the insurance and conflict with the insurer’s regulatory and legal responsibilities.
“We hope the statement will support insurers, intermediaries and their clients in making the group risk procurement process more efficient for everyone involved.”
The updated statement of best practice has been formulated to explain:
- the approach recommended by Grid in relation to supplier agreements, non-disclosure agreements, data processing agreements, and service level agreements
- how group insurance operates
- the safeguards in place for employer purchasers of this insurance cover
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