June 15, 2024

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Sometimes you don’t need an App…

Steve Herbert, Head of Benefits Strategy at Howden Employee Benefits explains why value-add features are important, but HR professionals mustn’t lose sight of the key reasons behind Employee Benefits provision

Recently I found myself acting as driver to my 12 year old daughter and two of her friends on the morning school-run.

Now any parent will be aware that the usual role of the school-run chauffeur – as with most good family retainers – is to be seen but not heard.  Yet on this occasion I just couldn’t help but get involved in the conversation.  This is because my passengers were clearly over-complicating a rather simple issue.

To save their embarrassment let’s call the three girls X, Y, and Z.

Y had recently issued birthday celebration invites to X and Z – with the event due to take place the very next day after our story begins.

X had duly accepted, but Z had forgotten to ask parental permission.  Z therefore wouldn’t be able to confirm attendance until the morning of the event (and therefore too late to book tickets).  Panic ensued.  How could this major problem be avoided?  A variety of increasingly complex solutions were suggested and abandoned by the three girls.

In the end I had to intervene and gently point out that X, Y and Z were all proud owners of a pocket-sized social-media system and computer – which is more commonly described as the mobile phone.  The penny dropped, a call was made (via the highly unfashionable “telephone” application), parental approval obtained, and the birthday party “crisis” averted.

The point here is that X, Y and Z had completely forgotten the primary purpose of the useful device they were carrying with them.  This happens in the world of Employee Benefits too.

More Apps than a Mobile Phone

Because it’s not just mobile phones that are offering an increasingly wide range of features to their users.  In the world of Employee Benefits it is now sometimes difficult to spot the central offering of a product behind a screen of ancillary “value-add” features and tools provided to sponsoring employers and their workers.

Now the need to offer such additional features is certainly valid, given that traditional Employee Benefits offerings often don’t appear that exciting to the employees they are set up to support.  Indeed the core benefits package for many organisations might only prove its worth when an employee is ill, retired, or dead.  Understandably that makes the marketing of the product and engagement with the end user more than a little difficult.

Employee Benefits providers have however responded well to this challenge, and over the last few years the industry has gone out of its way to provide lots of supporting functions to make their products that much more appealing to a far wider number of employers and employees alike.  Some of these features have also been truly important in their own right (for instance Employee Assistance Plans, Early Intervention Services, and online-access to medical professionals).

One product that has changed more than most as a result of these new features is the humble but really important Group Income Protection plan.  This key component of the UK Employee Benefits landscape – which provides a continuation of income in the event of a qualifying long-term illness or injury to the employee – now includes a wealth of valuable additional tools, and is a far more attractive proposition than it was 20 years ago.

Yet despite this significant increase in functionality and widening of appeal, the numbers of employees covered by GIP remains stubbornly low.


Why is Group Income Protection (GIP) not more popular?

In 2018 there were less than 2.5 million UK workers covered under GIP.  Whilst this is a healthy (and indeed growing) number, it is a relatively small slice of the UK’s 32.5 million workers.  So why is this?

One reason is a lack of product awareness.  Group Income Protection used to be known (and still is by some) as Permanent Health Insurance.  This rather flawed name did nothing to explain the important cover that was provided by the policy.  This in turn didn’t help with the marketing and/or appeal of the product.

The above name confusion probably also contributed to a lack of consumer (i.e. employee) demand for this class of insurance too.  Yet there was more to this issue than just a poor choice of name.  The reality is that workers don’t yet seem to actually recognise that this sort of cover is available.

In the early part of this decade the Group Income Protection insurer UNUM undertook some research to find out which types of insurance the average UK consumer claimed ownership of.  Their findings demonstrated insurance protection for items as diverse as cars (75%), possessions (69%), homes (55%), life (52%), pets (14%), and mobile phones (13%).  And second from bottom of this long listing was Income Protection, with only a meagre 8% of people covered.  This is a strange oversight given that the need to protect your income in the event of a lengthy illness is really important to the vast majority of workers.  Indeed, without this cover many claimants would not be able to put food on the table, let alone meet the premium payments for all the other insurances listed above.

The final problem for Group Income Protection is some rather out-dated employer perceptions that the product is clunky, or expensive, or difficult to manage in the event of a claim.  The truth is that market developments – plus a change of approach by insurers, intermediaries, and sponsoring employers – have dramatically reduced (or removed altogether) many of these arguments over the last few years.


The opportunity for employers?

So Group Income Protection is now a much more appealing product for employers and employees alike – but strangely one that is still not widely made available to so many workers.  This surely presents an opportunity for the savvy employer.

At the time of writing the UK is experiencing a period of record employment.  The war for talent is on, and many employers are looking for an edge to attract and retain the best candidates and employees.  It follows that offering GIP to all employees might well prove a clever and cost-effective move to outmanoeuvre the competition in the employment space.

The bottom line is the Group Income Protection is one of the most important Employee Benefits, and one that has almost universal appeal to employees if communicated well.  The ancillary benefits that now come with GIP make the product even more attractive, but – like the mobile phone – it’s the primary function of the offering that may still prove the most valuable to the end user.


Steve Herbert is Head of Benefits Strategy at Howden Employee Benefits