Group risk: Rising to meet the new challenges

The group risk market is having to adapt to changing circumstances, says Andrew Tripp, chairman of the Association of Medical Insurance Intermediaries. Nicola Sullivan reports

The traditionally rather staid group risk market is currently facing a number of challenges. For example, a softening on premiums has made the market more competitive and cost-efficient for employers. However, Andrew Tripp, chairman of the Association of Medical Insurance Intermediaries (Amii), fears that the uncertain economic climate will cause many employers not to maintain the levels of group risk benefits for staff that they had provided in the past.

“One thing that has definitely happened is premiums have become a lot more attractive. It is now a very competitive market, ultimately to the benefit of the consumer,” he says.

The closure of final salary pension schemes has also had an impact on employers’ group risk provision. When closing a defined benefit (DB) pension scheme, many employers review their ill-health and sickness absence benefits. Not surprisingly, group risk providers are keen to point out that employers can avoid future unfunded exposure by setting up a policy in place of ill-health and early retirement, which was often bundled into the DB package.

“As with everything in life, the world is about managing problems and those problems change. [The implications of DB scheme closures] is another issue employers need to get a handle on,” says Tripp.

Another issue currently affecting the group risk market is the “Dickensian” systems and administration processes used by some of the industry’s biggest players, says Tripp. “I went to see one provider about 18 month ago and went into its ‘paper factory’,” he says. “It was like walking into something out of a Charles Dickens [novel]. In an open-plan office, every desk had cardboard files, which were about 18 inches or two feet deep on every desk.

“The point I made to a very senior person at that provider was: why isn’t everything scanned and why is everything still on paper? There was a fairly apologetic response to say ‘we are in the process of updating our systems’. I was shocked they were still relying on paper-based files.”

The group risk industry has also come under fire for inaccurate quotations, inefficient and slow medical underwriting, and poor account management.

Raise professional standards

As part of efforts to raise professional standards in the insurance sector, Amii worked with the Chartered Insurance Institute (CII) to create a new examination for insurance specialists. The exam, launched in May this year, covers seven key areas, including: the structure of the UK healthcare insurance market; different roles and responsibilities of intermediaries and providers; applying risk assessment, rating and underwriting considerations and managing claims.

“We are keen to make sure all member firms and their staff engage in this [exam],” says Tripp. “As an industry, we need to up our game in terms of the suitability of advice that is given [to customers]. To have an exam to benchmark knowledge is incredibly important. The health-related insurance marketplace, be it medical insurance, group risk, death-in-service benefits or critical illness cover, is a highly complex market and I believe the end user should benefit from the highest level of advice. In some cases, I go to see customers where the quality of the advice is less than brilliant.”

On top of the pressure the market is under to improve service levels, group risk providers also need to work out how best to help employers deal with the implications of the Welfare Reform Act, brought in by the previous Labour government. Under the Act, incapacity benefits have effectively been scrapped and replaced with the employment support allowance as part of efforts to get people on long-term sick leave back to work more quickly.

In addition, the fit note system, which became law in April, turned the concept of sick notes on its head, with workers now being assessed for what they can do at work rather than what they cannot.

In response to this new legislation, providers have been keen to promote their rehabilitation services, some of which are designed to get employees back to work before a claim is made.

Although Tripp acknowledges that the increased emphasis on getting employees back to work as soon as possible is likely to reduce the number of claims made to insurers, he also warns that conflicts of interest could arise between group risk providers and the medical profession.

Positive impact on claims

“If people are going to be deemed to be fit to carry out certain duties, that is going to have a reasonably positive impact on [the amount of] claims made on group risk products,” he says. “It is an issue between the provider and the medical profession in determining what the employee is fit for. A GP might have one view and the provider that is facing the liability of the claim might have another view. There are potential conflicts there.”

Tripp says further clarification is needed on what proportion of responsibility should rest with the employer, the insurer, the medical profession, the government and the individual to speed up the return-to-work process. “One of [prime minister] David Cameron’s mantras is responsibility,” he says. “I think there are some very grey areas that need to be defined between all [relevant] parties, including the government. [We also need to know] where the group risk market can fit in between those areas.

“Where does the responsibility lie? Does it lie with the [group risk] product? Does it lie with the state? Are there products out there that are not yet in the market that take account of where the responsibility should lie? As sure as eggs are eggs, the government, running such a huge fiscal deficit, cannot continue throwing good money after bad because that has been going on for the last decade.”

Career history: Andrew Tripp

Andrew Tripp was appointed chairman of Amii at the association’s annual general meeting in May. Tripp, currently chief executive of insurer Perfect Health, has been a member of the Amii executive committee since March 2007. Before becoming chairman, he was treasurer.

As an Amii committee member, Tripp has helped to create a health insurance examination as part of efforts to raise professional standards in the insurance industry. The exam, created in conjunction with the Chartered Insurance Institute, was launched in May this year and covers seven key areas, including the structure of the UK healthcare insurance market and the different roles and responsibilities of intermediaries and providers.

“Having a benchmark professional qualification that has been embraced by the insurance providers, as well as the intermediary community, is a great leap forward,” says Tripp.

Among other previous roles, Tripp served as chairman of Perfect Health Insurance Services between 2005 and 2008.

Before that, he was regional director of the Western Provident Association, between 1995 and 2002, when he was responsible for the recruitment, training and management of the firm’s national salesforce.

Amii at a glance

The Association of Medical Insurers and Intermediaries (Amii) is a trade body for independent medical insurance advisers based in the UK. Established in 1998, Amii aims to promote and maintain high standards and ethical conduct among its members, which offer specialist advice on individual and group private medical insurance. It also exists to increase awareness of the role of specialist medical insurance advisers.

All Amii members are authorised and regulated by the Financial Services Authority (FSA) to sell general insurance products. Members must adhere to the FSA principles of business, which set out the standards all members must meet when dealing with employers.

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