Group risk benefits, such as life insurance and income protection, have been around for close to 200 years. And, while their objective has not changed significantly, employers are now using them in a much more strategic way.
Rather than provide group risk products simply as a perk or to match competitors, employers are looking for a return on investment on these benefits. John Kerr, director of group risk at Kerr Henderson, says: “Group risk benefits used to warrant a line or two in the employee handbook, with very few people even knowing they were part of their package. “Today though, they’re seen as a benefit for employees and employers alike, so they’re much more high profile. Employers want their staff to use them.”
Benefit selection
As well as promoting them more, employers are also taking a considered approach to their benefit selection. Nick Homer, head of market management for corporate risk at Zurich Life, explains: “Employers are using group risk benefits to meet some of their business objectives. Group risk plays into so many different areas including reward, risk mitigation, duty of care and supporting employee welfare. Providing and promoting these benefits can say a lot about an organisation.”
While the reason for providing benefits may have shifted, the choice of benefits has not really changed, with life insurance and income protection remaining at the core of many employers’ group risk strategies.
In addition, a growing number of employers offer critical illness insurance, generally through a flexible benefits arrangement. This can provide a more valuable benefit but also works well alongside other benefits. Katharine Moxham, spokesperson at industry body Group Risk Development (Grid), explains: “A modest amount of critical illness insurance cover could supplement a [private] medical insurance scheme,” she explains. “If an employee is diagnosed with a serious illness, such as cancer, they could use the pay-out to supplement the treatment they’re receiving.”
Added-value push
The additional benefits that are commonly included with group risk products are also playing a bigger role in an employer’s strategy. Cheryl Brennan, director of corporate risk at Punter Southall Health and Protection, says: “We’re seeing an increased focus on overall reward. Employers have already had to dig deep for auto-enrolment so they want their benefits spend to work as hard as possible for them. The additional services provided by the group risk insurers can help them achieve this.”
These services can include employee assistance programmes (EAPs), with some insurers now offering these as apps to reach more people; second medical opinion services; and health and wellbeing information.
Getting the most from these services requires additional promotion to employees. “Employers need to make sure their benefits, whether the core ones or the additional services, are signposted and joined-up,” adds Brennan. “They can also use management information and analytics to help them identify, and target, potential workforce health issues.”
The availability of so many additional services also means that employers should be mindful of benefits duplication. This can often be the case with EAPs, which are common additions to group risk products but also to health cash plans and private medical insurance schemes as well as standalone. “Duplication can confuse employees but it’ll also cost an employer more,” says Kerr. “We see cases where an employer is able to cancel a standalone EAP and use the savings to introduce a cash plan.”
Meeting modern needs
Benefit design has also shifted over the last few years to meet the needs of the modern workforce. A good example of this is the shift from providing group income protection cover to state pension age to offering a limited payment term product that provides benefit for up to five years.
“Few people stay with the same employer throughout their career,” says Moxham. “A limited payment term will still give them access to the rehabilitation services provided on the plan, as well as a bit of a breathing space to adjust if they’re unable to work again. However, it can leave an employer facing tough decisions at the end of payment term.”
Another modern workplace phenomenon the group risk industry has taken in its stride is the zero-hour contract. As these become more commonplace, some employers have looked to provide some benefit. Chris Morgan, chief marketing officer at Ellipse, says: “Group risk benefits are traditionally provided as multiples of salary but we’ve seen employers ask for a fixed level of benefit for workers on zero-hour contracts.”
Group risk benefits have also adapted well to the more diverse workforce, with the additional services key to this broader engagement. While an older employee might value the financial safety net, a younger one might engage more with the health and wellbeing initiatives. Similarly, supporting employees’ health can keep absence down and enable them to work longer.
Funding shift
Funding methods have also changed over time. Traditionally, employers have funded a blanket level of cover for all employees, but flexible and voluntary schemes are becoming more commonplace, says Morgan. “This can really suit the needs of the more diverse workforce, allowing [employees] to match benefit selection to their needs” he explains. “It also benefits the employer. Where an employee has to engage with a benefit, they are more likely to value it.”
Where employees are offered an element of choice around their benefit selections, a robust education process is important to ensure they can make informed decisions. Without this, there could be unpleasant repercussions, says Moxham. “There is a risk that an employee trades all their life insurance in for extra holiday and then dies in a car crash,” she explains. “If an employer is going down the flex route, it’s important they communicate effectively with employees.”
For additional security, an employer considering flex may look to provide a base level of cover, for example one-times salary for life insurance or a two-year limited term income protection plan, to act as a safety net.
Under review
Given the shift in the role of group risk benefits, regularly reviewing their features but also the reasons why an organisation provides them is essential. This can highlight any new services that might have been added but also may flag up a change in the workforce or the employer’s approach that require change.
Employers should make this part of the business strategy, says Brennan. “Employers need to look at the data and adjust their programme, or benefits promotion, accordingly,” she explains. “The focus used to be entirely on price but today, employers are much more switched on to what group risk products can help them achieve.”
