Need to know
- Employee benefits communication strategies should focus as much on the value of group risk provision as they do on workplace benefits such as pension schemes.
- A poor grasp of the financial implications of long-term sickness absence among staff has made income protection cover an increasingly important group risk benefit.
- Employees with the option of flexing group risk benefits and cover levels are likely to need help and support in making an informed decision.
Group risk benefits are now a core component of the employee benefits package, and include life assurance, income protection, and critical illness. Yet many employees do not understand the value and importance of these benefits, often due to poor communication on the part of their employer.
Employees can be grouped into three categories based on their understanding, says Simon Crew, consultant at Xerox HR Services. This includes a select few who understand the benefits, those who think they understand the benefits, but are mistaken, and those that do not know anything about the benefit through lack of knowledge or desire.
Crew says: “I don’t think that the basic principles behind risk benefits are that complicated, but most employers do not communicate them in a way that allows employees to make informed decisions. Employers spend a large amount of time, money and effort to communicate pension scheme benefits but very little time on the risk benefits.”
Income protection concerns
A more worrying aspect of this situation is the lack of awareness among employees about how much money they would need to survive the impact of being unable to work due to long-term illness. In these situations group income protection products can be invaluable in providing some financial security.
Martin Noone, managing director at Legal and General Workplace Health and Protection, says: “Our own research [Deadline to the breadline, published in November 2014] shows that the average person in the UK is four weeks away from financial struggle should they be unable to work and not receive their salary or wage income, making protection against such a situation vitally important.”
However, an appreciation of the importance of financial protection can depend on the individual employee and what they earn, says Adrian Humphreys, head of group risk and healthcare at JLT Employee Benefits. “At JLT Employee Benefits we still find group income protection has a lower take up rate than private medical insurance [PMI] or life insurance. This is a little strange, as for younger people without a family or mortgage, insuring your income for a few years is probably far more important than getting a lump sum should you die,” he says.
Appropriate cover levels
Flexible benefits schemes provide opportunities for staff to flex up and down and tailor cover to their current needs, but many feel unsure about which benefits or level of cover are most appropriate for them.
In spite of the choice, most employees retain the default or core level of cover, says Paul White, senior consultant at Punter Southall Health and Protection. He adds: “There are lots of reasons for this, including the fact that the benefits are relatively cheap, so flexing down doesn’t release sufficient funds.
“Employees also tend to believe that their employer knows what is right for them. Some simply lack interest. But clearly for the 5 to 10% who might typically elect a different level of cover, consideration would have been given to the impact.”
Most benefit platforms offer good guidance in these areas, even though most people still pick the default position, says Humphreys. “Again, age and financial sophistication of the audience plays a major part. Simple questionnaire-based systems can be very helpful in guiding employees to a sensible choice,” he says.
Digital channels can also be harnessed to communicate information around group risk benefits to staff, but communication strategies should take into account the particular demographic of the workforce. White says: “Group risk benefits must be communicated in an appropriate way for staff, based on whether or not they are computer savvy. Most [organisations] will communicate their group risk benefits by email or via the intranet as it is the most cost-effective way to reach employees in the most efficient manner, but as with paper communications, documentation should be regularly reviewed to keep it up to date.”
The consensus is that employers need to work harder at providing the tools and information to ensure that employees value and truly appreciate the group risk benefits on offer. Crew adds: “Employees need to be given more information so they can make more informed decisions. It is only when employees start to value the benefit that employers will see that investment they make is worthwhile.”