The impact of Covid-19, and the subsequent economic fallout is likely to leave a lasting imprint on the group protection and healthcare sector for years.
Attendees at a virtual round-table, hosted by Corporate Adviser discussed both the challenges for this sector in the wake of the coronavirus crisis and the opportunities presented by the high profile of protection.
Delegates attending the event agreed that the sector finds itself at a crossroads. The health emergency has meant that there is a renewed interest in workplace protection, with employers increasingly valuing the financial safety net, and the range of support services provided.
But at the same time the subsequent economic crisis caused by the lockdown means that many companies will find it harder to pay for these benefits going forward.
Howden Employee Benefits & Wellbeing senior risk consultant Paul White said: “There are conflicting dynamics in play that will affect the market over the next few years.”
He said it is likely there will be companies that have not offered this protection before who look to do so, particularly group life cover, potentially leading to increased sales in some areas.
But at the same time some companies that have protected their workforce in the past may end up going out of business. And some of those that survive may do so with reduced staff numbers, which will impact on sales of group risk and other health and wellbeing benefits.
“At the moment there are staff on furlough who are never coming back,” said White, adding that many firms are effectively “hollowed out”. He reports that he is dealing with clients that at the moment are not at work at all.
It is this second trend that could prove to be an overall brake on growth in the group risk and healthcare sectors in the next year or two and could see sales fall overall.
There will also be a pressure on businesses to justify benefit spend, said Premier Benefit Solutions head of risk and healthcare Allyson Gayle. “Employers face a real dilemma. On the one hand there is an increased focus on their duty of care towards staff, but there are likely to be significant financial constraints for many businesses.”
This may lead to an increased focus on the return on investment of healthcare and protection benefits, particularly where employers are looking to make benefits available across the entire workforce.
Gayle said: “In many cases I think clients are going to be looking to get more bang for their buck. If they are providing these benefits they will be looking for more added value services, as well as better communication and engagement tools.”
Those attending the roundtable agreed that the Covid crisis would change the focus for some companies on their benefit spend. Many agreed that corporate healthcare policies may look less attractive as a result and sales could struggle in these circumstances.
White pointed out that while many group risk products have delivered during this crisis, both in terms of financial benefit and support services, those covered by PMI policies have not been able to access core their benefits.
This was for perfectly understandable reasons, with the private healthcare sector’s capacity being reallocated to the NHS. But while many providers are offering rebates to policyholders, White said there is the danger of both employers and employees valuing these policies less, particularly given the increasing cost of premiums,
and the fact this is a taxable benefit for staff. If the refund is given and the P11D deduction returned to the member, the cost to the employee of having healthcare will be emphasised.
Delegates agreed it may be like an expensive gym membership: once you stop paying and stop receiving the benefit you may be less inclined to start paying the fees again, particularly if they haven’t missed this benefit in the interim significantly.
It is likely to be younger, healthier members of a scheme who are more likely to voluntarily opt out of group PMI, which could push up costs for remaining members, further exacerbating the problem for corporate healthcare said delegates.
But Advo Group employee benefit manager Jamie Tuffield said this opens up opportunities for more innovative providers in this sector. “There are providers with a wider benefit proposition, which might include more modular plans, or a more stratified and diversified premium option, with a range of ancillary benefits. This approach may appeal to younger members.”
Alex Pickard, a director of Willis Towers Watson Health & Benefits said consultants have a role to play in helping assess the range of benefit options going forward. “There will be challenges regarding price and the sustainability of value in these benefits against the economic background.”
Those attending the roundtable agreed that there was likely to be far more scrutiny of the various support services available on these products as part of this assessment.
Pickard said: “Clients will be looking at what else can be brought to the table, by insurers, in terms of support services.”
Canada Life strategic proposition director Paul Avis said there is often too much focus on the terms and conditions or product price, with some advisers not scrutinising ancillary benefits, or the third-party companies that often deliver these services.
“When recommending products to clients, are there appendices in client reports which rate the different support services available? Quality, communications and value is key.” he asked.
Advisers present countered that this was a key part of any review or recommendation made to clients.
Towergate Health & Protection consultant Daniel Toms said he does not necessarily recommend one type of support service over another — for example saying an EAP is of more use than a medical second opinion service. “It all depends on the client and what their particular needs are. Part of our role is to educate clients on the options available and help them assess what might be most relevant.”
Tuffield pointed out that in some cases clients have turned down the option to switch to a lower-cost plan, because they want these added value services, and feel this means retaining a higher cost proposition which offers better value for money.
There was disagreement though as to whether these support services are now viewed as more important than the core insurance services. White said consultants are essentially selling a financial benefit, which has the attraction of also offering a range of free add-ons. To focus primarily on these value-added benefits would be “like the tail wagging the dog” he said.
But others were less convinced. Avis pointed to a recent survey that found that a majority of advisers thought these support services were more valuable than the core insurance benefit. And Pickard said that for many smaller companies, it can make sense to focus on these added-value benefits as many of these organisations will never make a claim.
Regardless of what support services are used, all at the event agreed there was a need for these services to be flexible and focus on digital delivery in future.
Pickard said: “It is essential that these benefits can be delivered digitally, as more people are expected to continue working from home in the post-Covid environment.
“Benefit packages have to become less prescriptive and more flexible to meet the diverse needs of a modern workforce.” This could include a core benefit offering, with various additional options available via a digital platform or wrapper, he said.
In many ways these added value services and benefit packages can become almost a virtual HR department. Again this focus on human capital management can be particularly attractive to smaller companies, many of whom do not have separate HR department.
Pickard said that even in larger firms, HR departments are under pressure and some of the tools and services provided via employee benefit packages can be used to support the work they do.
Mercer Marsh Benefits head of health and wellbeing Elizabeth Turner said that part of the consultant’s role is to work with clients to help them understand the benefits available and the best way of access these services. This will ensures that benefits are properly communicated to employees.
This can be complex, she said, when companies have purchased a range of products which may have overlapping support services.
“We sit down with clients and help provide pathways to assist them. Often there is this paradox of choice, where a customer is not sure which is the best service for them to use and so don’t end up accessing any of them. We try to navigate a way through this by highlighting who they should contact for specific issues or problems.”
As propositions become increasingly benefit rich, and many of these newer services, such as a virtual GP become standard — in the same way EAPs have become ubiquitous in recent years — there will be more of a need for consultants to provide this communications service for clients to ensure maximise engagement with the diversity of support services that are available.
Delegates thought that despite the economic headwinds there was a real potential for the workplace protection market, with more value added services, more flexible propositions and greater digital delivery. Online benefits platforms specifically should be beneficiaries in the post-Covid era as more employees work remotely.
Challenges will remain on affordability, particularly for those working in industries that have been particularly hard hit by Covid-19, but with a wider understanding of the benefits available there is a genuine opportunity to continue driving the sector forward.