It’s no secret that the world of work, as we know it, is changing. In a 2017 employee benefits study, US insurer MetLife found that 58% of employees surveyed “want customised benefit options based on their personal information”. And according to the same study, 73% of employees believe their employers are responsible for their health and financial wellbeing. And in spite of this expectation, modern employees are unlikely to stay with the same employers for very long, because technology continues to create new opportunities.
In this competitive, changing job economy, it’s important for businesses to be as attractive as possible by offering their employees benefits that truly match their needs. If you’re advising a client about group risk cover for a business, it’s important to think of your client as a custodian of his or her employees’ financial security. And in terms of group risk cover, the financial security not only lies in the cover itself, but in offering benefits that add real value to employees’ financial planning – especially when considering that it’s the employees who are paying for their cover.
Why does a business need group risk cover?
Employers buy group risk cover for the people in the company to cover their future pay cheques in case something happens where they can’t work before they retire.
However, traditional group risk products don’t come close to meeting the actual need. They typically offer blunt amounts of cover that are equal to, for example, three years of pay cheques for everyone in the company – irrespective of how many pay cheques they have left before retirement. As a result of this approach, younger people in the company have less cover compared to what they need, relative to their older colleagues who have fewer pay cheques left to cover.
Traditional group risk products also offer very little flexibility, leaving employees with little, or no option to buy more cover above what employers secured. They also don’t offer a choice between lump-sum or recurring payouts when members claim, and often don’t secure employees’ ability to take their cover with them, should they decide to leave the company.
So how will you know you’ve selected the right cover?
Start by looking out for a product that works out how many pay cheques need to be covered for each employee, and then gives every person in the company the same level of cover in proportion to the amount of pay cheques left until retirement. By following this approach, the group risk scheme will provide more people in the company with much more cover. There already are forward-thinking group risk cover providers in the market that manage to offer up to 50% more cover by following this approach.
Secondly, look out for cover that enables employees to buy more cover – free of underwriting. There are innovative products on the market that offer up to double the cover with no medical underwriting, which enables employees to benefit from the employer group’s insurability to close gaps in their insurance. And – in the spirit of the modern world of work with a more mobile workforce – these innovative products enable employees to take the cover with them when they decide to leave your client’s company. So that, instead of a potential grudge purchase, their group risk cover becomes an asset in the employee’s hands.
It’s also important to ascertain whether the policyholders in the scheme will be able to choose between a lump sum and recurring pay-outs when they claim. Traditional group risk policies tend to expect employers to choose between lump sum or recurring payouts on behalf of all of their employees when they take out the cover. Forward thinking cover providers have turned this approach on its head, offering employees the option to choose between recurring or lump sum payouts when they claim.
The importance of claims certainty should never be understated, starting with obtaining a clear picture of the clinical conditions the group risk cover actually covers. There are new players in the market that provide extensive and transparent lists of clinical claims conditions for additional expense needs, covering more than 200 conditions.
And exactly how permanent does the insurer view a claim for a permanent condition? For example, if an employee is diagnosed with Stage 4 cancer, will he or she receive a 100% payout on diagnosis, without the prospect of ongoing reassessment? A needs-matched product offering would never require the reassessment of a successful permanent expense needs claim.
In conclusion …
You wouldn’t want your clients to be held responsible for choosing employee benefits that did not serve in their employees’ best interests – and here’s where you, the financial adviser, can make a positive difference by selecting appropriate needs-matched group risk cover. In doing so, you will not only be championing the interests of your clients, but also their employees by providing security and benefits offering real value in the modern world of work.
AUTHOR: Schalk Malan, CEO of BrightRock