Group Risk Report 2011


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Market is changing

Rising to meet the new challenges

Limited-term group income protection

Room for improvement in administration

Sponsor’s comment: Time is right to take advantage of group risk benefits

There has never been a better time to consider the benefits that group risk can bring to your business, especially with the additional services that are now provided with the product.

“It only benefits employees and not employers,” was a comment I heard recently when speaking to employers about group income protection (GIP) benefits. This was a reminder for me to recognise the changing perceptions that employers have of certain employee benefits and what they believe they will gain from benefits.

Group life cover continues to be the most common group risk benefit taken up and has traditionally been seen by employers as an inexpensive benefit to offer with a high perceived value by staff. Critical illness cover is usually offered as part of a flexible benefits or voluntary arrangement. The current economic conditions have checked the recent growth in this market, with rising unemployment reducing membership of such schemes. The GIP market has seen a significant reduction in the cost of buying cover over the past two years and continues to provide key benefits not only for staff, but for the employer purchasing the benefit.

One of the most important benefits of GIP for an employer is the transfer of the cost of long-term absence from the business to the insurer. On average, the cost of GIP is 1% of payroll, but what is the cost of long-term absence to your business? When you work out the costs of paying employees who are off sick and the resulting loss of productivity, the cost of a GIP policy may look attractive.

A single claim for a small or medium-sized company could cause serious financial hardship for an employer. If a key employee was off sick for a long time, this could threaten the financial security of the company if no provision is in place to fund their sick pay and bring in a temporary replacement. GIP plays an important role in transferring this risk and allowing the insurance company to cover future claims, both small and large. The tax advantage of being able to offset the cost of the cover as a business expense is also appealing.

As well as the product benefits, a GIP product, like all group risk benefits, brings many additional services to the employer. Insurers are now looking to intervene earlier for employees who are likely to be off sick long term. Early intervention, sometimes involving the insurer paying for medical treatment, may result in the employee returning to work sooner than expected.

Many insurance companies also offer employee and/or employer assistance programmes (EAPs) as part of their group income protection product. These programmes can provide employers with information on business, legal and HR issues, while offering other services such as proactive debt management and counselling for employees.

If promoted effectively in the workplace, GIP continues to be recognised as a highly valuable benefit for retaining and attracting staff as part of a comprehensive benefits package. It further reflects well on the company brand when an employer holds central to its beliefs the health and wellbeing of staff.

When assessing an employee benefits package, it is important to review the benefit it brings to staff, but employers should not forget the benefits it brings to them too. With such a variety of benefits offered by GIP, coupled with today’s competitive environment, there has never been a better time to consider this cover for your business.

Declan White, group risk marketing manager, Friends Provident