Group Insurance

Hi everyone, this week we are focusing on group insurance and we have Katharine Moxham from GRiD (Group Risk Development) with us.

Katharine takes us through claims statistics, how free medical underwriting works, the benefits that an employer can access through these insurances and much more.

The key takeaways:

  1. Group insurers paid £100 million in claims relating to covid in 2020.
  2. How group insurance can increase access to insurance, for people living with health conditions.
  3. The benefits to both employers and employees from arranging group cover.

I will be back in a couple of weeks with Matt Rann, and we will be chatting about diabetes.

Remember, if you are listening to this as part of your work, you can claim a CPD certificate on our website.

Kathryn:       Hi everyone, this is episode 10 of season three and we have Katharine Moxham here with us today from GRiD, joining myself and Roy on an episode all about group insurance.  Hi Katharine, hi Roy!

Katharine:    Hi.

Roy:            Hiya.

Kathryn:       Today we are focusing on group insurance, what it is, how people can get it and why businesses might want it and the benefits it can give to both employers and its employees.  This is the Practical Protection podcast.  How have you both been over the weekend?

Katharine:    Very good, thank you.

Roy:            Yeah, no, the sun is out and everybody’s happy again [laughs].

Kathryn:       Absolutely, absolutely.  I have to say, I’m – the sun has been out but I’ve still been whingeing because it’s really cold here so I’ve been in a dressing gown all weekend, hiding inside but it has been lovely and sunny which in itself obviously makes everybody I think happier.  So, today we’re going to be going into the group side of things.  It’s something that I think is incredibly important, especially with so many small businesses possibly being unaware of it but also how much small businesses actually make up a huge amount of schemes that are in place within the group insurance market which is just obviously incredible to see.  I think a big thing to maybe start off with Katharine – I think people kind of know what group insurance is but we don’t – some people don’t know it know it.  Can you maybe go through with us please sort of like what – give us a bit of a rundown as to about what group insurance is?

Katharine:    Okay.  Well employers will often promise certain benefits as part of the contract of employment and employer-sponsored death benefits, long term occupational sick pay and critical illness benefits are what we mean by group risk and some employers obviously will bear the cost of them themselves, they’ll self-fund it but many choose to take out insurance to cover their liability or their promise.  So group life assurance provides a tax-free lump sum on an employee’s death and it may include a taxable dependant’s pension but less so nowadays as they’re getting increasingly difficult to fund.  And this gives security for dependants of an employee at a time of great emotional loss and for many low to middle earners, group life cover through their employer might actually be the only life assurance provision they have which is not necessarily the best thing but at least they have something.

Group income protection provides an ongoing income to an employee if they can’t work for an extended period because of illness, injury or disability.  The employee remains on the payroll usually and so tax and national insurance continue to be paid and other benefits such as pension accrual will continue.  Group critical illness provides a tax-free lump sum on the diagnosis of the defined critical illness such as cancer and this could be used by the employee, say to pay for treatment, for home modifications, nursing care and so on.  Now, it’s important to remember that employers don’t have to provide any of these benefits so those that do play a really vital role in helping financial resilience, protecting savings and actually saving the State a considerable burden.

And on top of that, group risk policies come with all sorts of embedded extra support now that don’t cost anything for an employer but actually give employers, businesses, HR and employees support on a daily basis so things like an employee assistance program, maybe fast access to counselling and physio, a second medical opinion service, health apps, virtual GP services, rehabilitation expertise, HR advice and much, much more and you can imagine how helpful these support services have been through the pandemic and particularly the lockdown when people have had to find other ways of keeping fit and other ways of seeing a doctor.

The big thing about group risk protection benefits is that they’re inclusive and they will give most employees access to a generous level of cover at no or low cost and typically not many people will be asked to provide medical evidence and will get the cover irrespective of their state of health and that’s because group risk providers are a bit more relaxed about seeking medical evidence.  They’re looking at a pool of people not just one individual and so when we do look to capture medical evidence for people, we’ll seek to capture the top few earners within an organisation and even then we’ll only do it once and they should get a generous level of cover in any case without having to go through the process.

This is incredibly advantageous as you can imagine, not just for those people who might not be able to afford to pay for their own protection provision but those who have health conditions who might otherwise be declined or charged extra premiums under a consumer policy and it gives them easy access to this because the employer is the one that takes the advice on the benefit design, on the cover levels which they’ll align to their own business goals or contractual obligations or merely just on good practice so they might look at what other local employers are doing and try and match that.  The employer will take advice on the suitability of providers by way of a market review and this is a process that’s done regularly and thus keeps cost down and the design appropriate so you’ll keep up with legislation changes because your provider will help you to do that, your adviser.  A few numbers maybe?

Kathryn:       Absolutely, statistics are fab.

Katharine:    Okay, so over 13 million employees are covered by group risk policies and thus have this generous financial provision without having to personally worry about taking advice or finding it or, you know, dealing with whether it’s affordable, good value and so on and we do what we say on the tin.  We pay out – in 2019 – we’re just working on 2020’s figures so I can’t give you those but 2019, we paid £1.7 billion in claims to 26,000 people plus which is equivalent to £4.82 million a day.  We helped about 5,200 people back to work after a short period of sick leave before they became a real – or had real problems and we had about 75,000 interactions with the added value embedded help and support.  Cancer was the main cause of claim across all three products and we paid out around £100 million for Covid death claims during 2020.

Roy:            What a fantastic and comprehensive summary of the market!

Katharine:    It’s a bit lengthy [laughs].

Roy:            That’s brilliant Katharine.  I mean look, there’s so many fantastic subjects in there.  I think if we just pick through some of them to illustrate some of the benefits for our listeners.  I mean the first one that obviously people who do individual protection will be very aware of is the added benefits services that you’ve described.  In the main, they’re very similar to the individual side.  Over the last 12 months in particular with Covid, do you think the industry has come on leaps and bounds in terms of those services, in terms of not only being appreciated but being understood by clients?

Katharine:    I think so, definitely and communication’s key, isn’t it?  I always say, it’s no good having these things if you don’t tell your guys to use them and they really have come into their own.  I haven’t got the numbers yet but we are expecting the use particularly of employee assistance programs and online GP to have gone up exponentially over particularly the first lockdown when you really couldn’t do anything.  And I think they have been extended by providers so to more of a workforce than is necessarily covered by a policy for example in the recognition that these are really valuable services to people at the moment.

Roy:            And on EAP, just for our listeners –

Kathryn:       I have to have a turn Roy.  Let me have a speak.

Roy:            You will.

Kathryn:       [laughs]

Roy:            On EAP, it’s probably just worth – again with talking to people that might not have come across them before, could you give us a quick description of what EAP actually means and the practicalities of how it’s used by employers?

Katharine:    Okay, so it’s short for employee assistance program and I think there’s a bit of a misnomer out there in that lots of people think it’s only for use for emergencies so, you know, you would use it actually for, you know, relationship difficulties, getting into financial difficulties but it also – they’ll also – the services will also give a huge amount of information and help around things like avoiding flooding, dealing with flooding or emergency childcare or elder care – in fact I’ve used it personally for helping to source some emergency care for my own mother.  So I know it does what it says on the tin but mostly people will really value it for the mental health support that you get through these services and certainly some counselling that will be provided alongside the program.

And, you know, when we’re looking for employers – the Government’s looking for employers to really support their people in this area, this is a really easy way of accessing that support and, you know, it’s built into another product that’s really valuable and which will give some financial support in the event that it’s actually needed.

Kathryn:       I think one of the things I wanted to ask you about, was obviously what are the benefits to employers which I think you’ve gone through quite well and probably a little bit more in terms of like the medical underwriting.  So I think sometimes that can be confusing but I think a good way to maybe give an example as to sort of like the free medical underwriting limits to people is to – if you were to take me, for the life, CIC or IP side of things when it comes to group cover, so obviously I happily talk about my health all the time but just for anybody who does know, I have hypermobility syndrome, I have generalised anxiety disorder, both of which are not necessarily favourably looked at for income protection – it’s a lot better than it used to be but still there would be exclusions.  I have an underactive thyroid and I also have postural tachycardia syndrome which means that I have a fast heart and different things going on that way as well.

So typically if I were to try and get income protection on a personal life basis, I’m going to struggle to get that and especially not to have exclusions but when it comes to sort of like these free medical underwriting limits, as you were saying, it’s very inclusive so do you mind just explaining a little bit more about those levels please?

Katharine:    Okay, well we call it free cover.  It doesn’t mean it’s free of cost but it does mean it’s free of medical underwriting and as I mentioned earlier, would generally give a very basic – a generous basic level of cover to everyone within a group of employees without the need for providing medical evidence and regardless of their state of health.  So Kathryn, for your circumstances, so long as your benefit was less than that free cover level, you would be in, certainly for group life.

Kathryn:       Yeah. Without any exclusions?

Katharine:    No exclusions, no.  And you will find that there might be – for smaller groups particularly, there might be what we can an actively at work provision so you would need to satisfy that which basically means being – doing your normal job, normal place of work, normal hours and have not been told not to work by your doctor.  So for group life that would apply to smaller employers but generally it’s waived for larger groups.  For income protection – group income protection, that will apply the day before your cover starts and group critical illness is slightly different in that it’s largely provided on a voluntary basis and so generally we don’t underwrite that product but by a pre-existing conditions exclusion instead.  So that does work slightly differently.

Where we do seek medical evidence for higher earners, we try very hard just to do that once.  We arrived at a position some years – well many years ago now where we were looking particularly on group income protection to look at people’s attitude towards their health conditions, you know, are they managing it properly?  Do they take their medication?  Do they, you know, measure their blood sugar level for example in the case of diabetes?  And I think really attitude as well comes into it because generally you don’t get to be a high earner within an organisation if you’re not motivated to keep working and to work through anything that might be a bit of a nuisance to you health-wise [laughs] if that makes sense?

Kathryn:       Yeah, I think it does.  Thank you.

Roy:            Probably also worth pointing out Katharine, isn’t it, that the other great thing about a free cover limit is that if someone doesn’t want to be underwritten for the amount over it, they can still take the free cover limit?

Katharine:    Yeah, absolutely.

Roy:            So they can’t be worse off by – and that’s I think part of what the advisers should be doing, is always encouraging people, you know, to go for this – not always a medical is it?  Sometimes it’s just the questionnaire, you know, to fill that out anyway ‘cos you don’t go past go do you?  You don’t become worse off whatever, so that’s what we always say to people.

Katharine:    No, absolutely and, you know, execs are busy people and they don’t like spending time on these things rather than –

Roy:            They don’t like filling in forms as we all know!

Katharine:    They do not, they do not but you’re right, they will still get that generous level of free cover.

Kathryn:       And it can be extremely generous as well.

Katharine:    Yes it can.

Kathryn:       We’re talking into hundreds of thousands of pounds –

Katharine:    Yeah.

Kathryn:       With the life insurance.

Roy:            One of the situations we’ve come up recently here is sometimes you get that typical company that says, “Look, just cover all the guys at the top,” and what we actually point out to them is that if you cover everybody in your company, your free cover limit becomes greater, i.e. the more people you cover, relatively the more cover you get so it’s counterintuitive isn’t it?  You think, “Oh we’ll just cover the people at the top ‘cos it’s going to be a better policy, you know, for doing that and end up being cheaper,” whereas expand the needs does two things; firstly it gives you a better free cover limit which helps the people at the top but equally you cover people towards the bottom or at the start of their careers for things that they will never have had before.

Katharine:    Absolutely and I think often as well it can be cheaper to do it on a group basis than, you know, five or six exec policies for example.  So, you know, you’ll be bringing probably the average age of the group down and the average cost down –

Kathryn:       Absolutely.

Katharine:    By including everyone.

Kathryn:       Something I wanted to ask as well because I have this obviously – it’s quite well known that I speak with people quite a lot who have health conditions and I’ve had it a few times where people have come to me and said, “My employer offers life insurance through work and I’ve gone for it and I’ve had to fill out a medical form,” and obviously straight away my alarm bells go, thinking, “Well, hang on, if they’re offering that, why are you having to fill out medical forms?”  Because I can tell obviously by salary levels they’re probably not going to be going into – past the free cover limits and everything like that and they say to me, “Well I’ve had to do that or they’d decline me the cover.”  And I don’t know whether or not that is something that’s like unique to some group insurers or some group insurances or if it’s maybe a misunderstanding by that individual.  Can you explain how that maybe comes about sometimes Katharine?

Katharine:    Yeah, sure.  Obviously it’s difficult to comment without the specifics but there are some circumstances where free cover might not apply.  So for voluntary arrangements for example where membership isn’t compulsory but by choice or maybe for a flexible benefits arrangement where somebody chooses to take out life cover outside their normal window of being able to choose that benefit or where somebody is joining a scheme early or late, you know, after their first opportunity for example there might be a questionnaire asked for from people in those circumstances.  And it might be a short questionnaire, it might be four questions, tick, tick, tick, tick and you’re in but if you can’t tick all the boxes then we might want a bit more evidence and it might be used for people who aren’t actively at work on the day their cover started or the previous day for group income protection for example.  We talked about that just now.  They’re the small circumstances where that might apply.

And we’ve actually recently done some research on, you know, how many people have been impacted by that and if you remember the 13 million people plus that we cover, for group life assurance there were 78 people between January and the end of September last year who weren’t able to obtain group life cover for their immediate needs at that time and for group income protection there were 36 people who weren’t able to obtain their group income protection cover at that time.  So relatively small numbers but of course that doesn’t help the people it happens to which is why signposting is very important to the group risk industry as well as the individual industry.

Kathryn:       Absolutely.

Roy:            Now funny you should say signpost, as you’ve hopefully been reading over the last few weeks, we have self-styled 2021 the year of the signpost and I think the important thing to say about signposting, for all of us, is that it was never just about protection advisers, it was always about mortgage advisers, it was always about wealth management advisers but many people say actually it’s about employee benefit advisers as much as anybody else because there is a situation out there, isn’t there, where some EBs will look at certain schemes below a certain number and that’s just not their sweet spot, you know, the place they specialise in but equally there might be lots of individual advisers that are meeting smaller companies just in their day-to-day coming around and these might not be necessarily the sort of companies that would find an EB as well.  So, do you think signposting has opportunities – and I’m talking about from both sides, you know, for the EB market, in terms of people referring to them but equally them referring back to potential other specialists?

Kathryn:       I’m going to quickly butt in if that’s okay.  Just for the listeners who aren’t familiar with group, can we explain what EB is please?

Roy:            Employee benefit advisers.  So traditionally employee benefit advisers were companies who would look after historically larger employers, okay, so they would tend to have limits as to, you know, the numbers of people that they would look after and I was just very conscious of – I mean, those figures that you’ve mentioned Katharine, are phenomenal in terms of the amount of people that are covered but we do always need to be aware that 95% of companies in the UK are 10 people and less aren’t they?  So it’s brilliant for the big employers that have these but actually there are vast millions of people that just don’t have access and that might historically have been because of that level of serviceability.

Katharine:    Yeah, I agree and I think, you know, some employers don’t know what they don’t know do they?  And, you know, it’s not until the situation comes along when somebody is off sick for a length of time for example or somebody dies within the business that they think, you know, “Should we have done something about that?”  So I think serviceability is a really important thing but I think that employee benefits advisers – some will really see these markets as as important as their larger clients, you know. Smaller businesses don’t necessarily stay small do they?  They grow and, you know, many advisers will be set up in such a way that they do have arrangements in place to help smaller employers and that might be by pooling all their smaller groups together with one particular group risk provider for example where a smaller employer will get the advantage of the services that a larger employer will get and maybe better free cover levels for example.  What they might not get – or they won’t get necessarily is the full review of the market but often that could cost you more than any saving you might make by undertaking exercise at that sort of size.

So there are arrangements in place with most employee benefits advisers where they can help smaller employers and, you know, through offering a slightly more streamlined service help them to gain the advantage of the group market.

Roy:            Nevertheless, I think we’re probably saying there is still an opportunity here and I guess one of the questions that Kathryn and I get asked a lot by our individual colleagues is, “Is this a marketplace that we should think about getting into just because of the vast size of it?”  What would you say to a protection-only – individual protection-only adviser that was thinking of looking into group?

Katharine:    I’d say yeah, by all means certainly, you know, the more advisers the better.  You know, I think there are so many smaller employers out there who don’t have access to an adviser but where their execs might use a mortgage adviser and so there are opportunities to broaden that conversation out.  But I’d say don’t dabble.  Either do it, don’t do it or signpost it.  You know, there are some expensive mistakes to be made in this business and – but in the same way that you become an expert within your own field of knowledge, there’s no reason why you can’t do the same in terms of group risk and particularly if you’re already dealing with individual protection products, they’re not the same, they are different, you know, apples, pears, bananas maybe but you will have a reasonable understanding.  It’s just about due diligence, about finding out, you know, the CII do a qualification called GR1.  GRiD does a number of – or training on a number of levels so join GRiD, get the training and, you know, build up to it.

Kathryn:       I was going to say, that was the thing I was going to come onto next actually was that point of saying, “Don’t dabble,” you know, in a sense it is something where – especially if people have potentially protection on their lifetime allowance, it can be quite significant mistakes that can be made depending upon – in the life insurance side of things, the group life – whether or not someone chooses a registered or excepted scheme.  I’m wondering if it’s just worthwhile having a brief chat Katharine, about what the differences between those two options are?  Just in case somebody is dabbling a little bit in the group space so they know that they – so they maybe have some ideas initially as to try and avoid what could be a very, very nasty situation.

Katharine:    Indeed.

Roy:            I’m loving the word ‘dabbling’ on a Monday morning by the way.

Kathryn:       Careful.

Roy:            Fantastic, Monday morning word.

Kathryn:       [laughs] Dabble [laughs].

Katharine:    Yeah, group life historically fits within the pensions tax regime and the roots of this are steeped in history and go back, you know, to the year dot.  But that does bring complications around the lifetime allowance and pension protection and, you know, when we look back to A-Day, I can’t even remember how long ago that was.  Was it 2004?

Roy:            2006 wasn’t it?  Or 2004, it was a long time ago anyway.

Katharine:    A long time ago anyway.  So that was supposed to simplify it really but for me I just think it further complicated matters and particularly the fact that somebody can use – lose their pension protection just by joining a registered group life scheme.  So many employers will use an excepted group life policy for their high earners and excepted group life is the group version of a relevant life policy which most of your listeners, I’m guessing, will be familiar with.

Roy:            Yeah.

Katharine:    And they might just use it for their high earners or they might use it for everybody because, you know, particularly when you get to any sort of size, are you really going to ask each new hire about their pension protection, particularly, you know, when they’re not at exec level?  You know, I’m not sure that you’re going to be doing that as an employer so maybe it’s safer to pop everybody in for an excepted scheme but there are disadvantages to doing that as well in that there’s a number of criteria that must be met and also there are potential charges – tax charges at entry, every 10 years and on exit on the discretionary trusts that are used primarily to distribute the proceeds tax-free.  So GRiD and the Access to Insurance group are campaigning for the removal of those tax charges under excepted group life policies because they’re mainly arbitrary, they raise very little for HMRC but they’re incredibly expensive for employers in terms of taking legal advice and it really would result in a simplified way for employers to provide life assurance for their people.

Roy:            So we should probably give a live example shouldn’t we, Katharine?  Let’s say we had a person that had multiple salary, death in service, that took them up to five or six hundred thousand pounds if they were to pass away at work and then they had a pension benefit that was over – took them over £1.1 million, which is the current allowance currently, that would result in a 55% tax charge.

Katharine:    Yeah.

Roy:            So this is a really punitive tax and one of the problems there you quite rightly pointed out is that not every employer is going to be aware of someone’s past pension arrangements, particularly if they’ve had a final salary scheme because the way final salary schemes are worked out is slightly different to others.  One of the dilemmas here talking to employers is that they would quite rightfully turn around and go – not only do they probably not know but they probably – it’s none of their business to ask that question and therefore sometimes you do get this sort of, you know, proverbial brick wall plus of course, it’s not as simple as I’ve just described because any pension growth – so growth within your pension fund could equally take them over £1.1 million and as we all know, in the recent budget, the Chancellor has frozen that limit, you know, certainly for the next three or four years – maybe for longer, so more people than you’d expect fall into this trap – if I may call it a trap.

Katharine:    Yeah, definitely and, you know, the question is who pays that 55% tax charge?  You know, is it the responsibility of the company, the trustees or the beneficiaries as well?  So, you know, there’s that complication as well to consider.  So as I said, many employers are going straight into an excepted group life policy for everybody that they employ.

Kathryn:       It becomes quite scary actually a little bit as an adviser actually because if you are advising on group and then obviously, as you say, somebody that you’re helping with a scheme suddenly employs somebody and there’s – that conversation isn’t happening, you’re not necessarily going to know that somebody’s entered into the scheme.  It’s kind of a case of well where does their – if there’s any kind of fallout, which – there’s bound to be fallout somewhere, whose fallout is it?  Is it the employer?  Is it the adviser?  Is, you know, where does that happen and I think that’s why it’s so important.  Like you were saying, I’m going to say your favourite word again Roy, we don’t dabble.  We make sure that we get the good training, especially from places like GRiD and make sure that we are really feeling as if we are on top of knowing all these little intricacies.

As with anything, there’s always intricacies in these things that we need to learn about.  So obviously – as everybody knows, I do the protection side of things, I don’t do investments, I don’t do pensions.  I would be absolutely terrified of suddenly going like, “I’m going to do pensions and I’m just going to start to dabble a little bit and see where I go.”  I think that would be – that seems like the worst idea I could possibly ever do so I think it’s incredibly important that people do take that step to really take the training before they start to go into it. But it is –

Katharine:    Well absolutely.

Kathryn:       It is really worthwhile doing.

Katharine:    Yeah and, you know, this is regulated business by the FCA as well so, you know, you need to demonstrate competence so there’s that as well.  And the thing about group risk is, you know, the concept’s really easy isn’t it?  It’s really simple, you know, you die, we pay you, you’re off sick for any length of time, we pay you, you get a critical illness, we pay you but the regime it all sits in is incredibly complicated and can be a disincentive for employers and for advisers.

Kathryn:       Absolutely.

Roy:            In terms of the fear factor, you know, that’s something that a lot of articles have been written about and I know Rob Wheatcroft who is a bit of a God of the industry has been talking about this recently as well.  The fear factor shouldn’t be something that precludes people from – let’s remove the word ‘dabbling’ and let’s say going into this business properly.  Would you say that that just reinforces signposting though because – isn’t this the whole point about our industry should be joining together in so many different ways as a united force and not everyone’s going to expect the adviser to be the expert to your point Katharine, at the pension, at the protection, at the group – at the everything else and actually if we come together as an industry and you might have two or three advisers within your signposting group – no corporate company is going to have a problem with that presumably?

Katharine:    No, not at all.  You know, you’re just providing expertise.  You know, we don’t have a problem when we use a solicitor with also using a barrister do we?  We don’t have a problem when we go to our GP and get referred to a consultant.  So why should we have a problem if we go to our adviser and get referred to a specialist within the area that we need?

Kathryn:       It’s a brilliant example, a brilliant sort of like comparison there actually.

Roy:            Could we ask you about early intervention services ‘cos I think this is a subject where, you know, I’ve got feet in both camps as you know where I’d say the group side of our business has done fantastically well particularly recently and particularly over the last year or so with mental health and wellbeing whereas I think Kathryn and I would both agree the individual side probably – what’s that famous phrase from school?  “Must do better,” is what I got told quite a lot but could you give us an example of early intervention and why it’s worked so well on the group side?

Katharine:    Okay.  Well we sort of started this journey some years – well many years ago now – I’ve been working for quite a long time now, where we looked at, you know, in the old days you had a group income protection policy and somebody would be off sick for six months and you’d get the policy down, dust it off, you know, write to the insurer, phone the insurer and say, “Oh I’ve got somebody who’s been off for six months,” and the insurer would then start gathering medical evidence to support a claim which could also take six months and, you know, in the meantime this poor person is in receipt of nothing and so we started to move away from that and to look at, you know, what is somebody capable of?  You know, rather than focus on the disability, the illness, you know, what is it that is preventing them from getting back to work?  And many times it would be, you know, they couldn’t access treatment and so we began to think, “Well, you know, what if we made that a bit easier to access?”

And, you know, roll forward many years and the next stage on that journey was really to think, “Well okay, let’s start intervening, let’s start meeting with somebody, you know, in their first month of absence,” because it was becoming very clear that, you know, when somebody is off work for six months or more, the chances of getting them back are fairly slim, you know, if they’ve become really embedded in this absence and so we really do see the value of all these interventions that we provide and the extra services that we provide.  They’re all intended to help people deal with not just illness but things that distract them like simply moving house for example – there is a big load of stuff around moving house so let’s try and keep that easy for somebody and give them the help that they need with that and, you know, particularly around mental health conditions, around musculoskeletal conditions, let’s get them that treatment, let’s get them into some counselling, let’s get them into some physio.

And the next stage in that journey was well, okay, let’s look at ways that we can prevent somebody going off ill.  If somebody knows how to sit properly at their desk for example, that’s going to save them an awful lot of backache and so I think we arrived at this point some years ago where we were ahead of the State in looking at, you know, how to help people get back to work or stay in work and not be absent in the first place and it really does work.  You know, the 5,000-odd people that we got back to work within a relatively short time-space during 2019 sort of demonstrates the effectiveness of that and at the end of the day it will mitigate claims and it will keep employers’ premiums and costs down and it really is worth doing.  But we have quite a long deferred period within which to do that whereas that’s not necessarily the case on some individual policies is it?  So I can see why that might not be attractive to an individual provider necessarily but certainly in terms of mitigating the longer term claims, I don’t see why there would be any difference.

Roy:            Yeah, I think that what frustrates the likes of Kathryn and I and other people on the individual side is when you have someone who rings you up in the early days, typically a 13-week, 26-week deferral and says, “Look I do anticipate a claim,” and we try and ring the insurer on their behalf and we get the, you know, the statutory response is, “Well come back when the deferral period is up.”  Which is just outrageous if you think about it.

Katharine:    Well I – sorry.

Roy:            Yeah, so I just always thought, well hang on a minute.  If I make that same phone call to a group provider who often by the way could be the same provider, you’d get a completely different attitude and I think the other great thing for early intervention from an HR point of view is that particularly with mental health and wellness, which is quite rightly the thing that, you know, takes front of house and is now no longer the taboo subject it was, with a smaller company where the HR capabilities, you know, might be limited or if at all, the fact that they have that help in particular with mental-related claims is just a godsend to those sort of companies because obviously they don’t have the skillset to deal with it themselves whereas you can pass it over to an insurer who has the qualified counsellors and psychotherapists and psychologists and all that sort of stuff and I always think it’s just a bit odd that we don’t do that on the individual side when, you know, the biggest cause of claim is mental health now.

Katharine:    Yeah, no it’s difficult to comment really from my perspective because it is so effective and we do find it works and – but also it’s, you know, for those claims where it will go through to a claim then we’ve started gathering the medical evidence we need to support that claim much earlier which –

Roy:            Much earlier, yeah.

Katharine:    Yeah, by the end of the deferred period, nobody’s left in limbo and their claim can be paid at that point rather than three, four months later when you’ve, you know, left it to gather the evidence in.  So I, you know, on both counts, I don’t see there’s a way to lose really.

Roy:            You’re preaching to the converted, isn’t she Kathryn?

Katharine:    I know, I know.

Kathryn:       Absolutely.  This has been absolutely brilliant Katharine, thank you so much for coming and sharing the insights and everything.  Those statistics were very sobering.  Obviously they are sad but they are a real testament to what these insurances can do and I do think it’s really important that as advisers we do look for these opportunities.  As something I always say to my team, is when you’re chatting to somebody as part of our – obviously any adviser’s factfinding is to ask about the occupation and you immediately – you make sure very subtly early on, “Do you have your own company?”  And that should just be part and parcel really of any adviser’s call because it just brings up so many opportunities.  They can help obviously the client but also there’s quite a significant opportunity for the adviser as well.  So thank you very much for coming.  I’m –

Katharine:    My pleasure.

Kathryn:       I’m going to be back next time with Matt Rann and we’re going to be chatting about diabetes and insurance so if anybody would like a reminder of the next episode please drop me a message on social media or visit the website, www.practical-protection.co.uk and please don’t forget that if you’re listening to this as part of your work, you can claim a CPD certificate on the website too.  Thank you so much for joining us today, Katharine.

Katharine:    You’re welcome.

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Group Insurance

Hi everyone, this week we are focusing on group insurance and we have Katharine Moxham from GRiD (Group Risk Development) with us.

Katharine takes us through claims statistics, how free medical underwriting works, the benefits that an employer can access through these insurances and much more.

The key takeaways:

  1. Group insurers paid £100 million in claims relating to covid in 2020.
  2. How group insurance can increase access to insurance, for people living with health conditions.
  3. The benefits to both employers and employees from arranging group cover.

I will be back in a couple of weeks with Matt Rann, and we will be chatting about diabetes.

Remember, if you are listening to this as part of your work, you can claim a CPD certificate on our website.

Kathryn:       Hi everyone, this is episode 10 of season three and we have Katharine Moxham here with us today from GRiD, joining myself and Roy on an episode all about group insurance.  Hi Katharine, hi Roy!

Katharine:    Hi.

Roy:            Hiya.

Kathryn:       Today we are focusing on group insurance, what it is, how people can get it and why businesses might want it and the benefits it can give to both employers and its employees.  This is the Practical Protection podcast.  How have you both been over the weekend?

Katharine:    Very good, thank you.

Roy:            Yeah, no, the sun is out and everybody’s happy again [laughs].

Kathryn:       Absolutely, absolutely.  I have to say, I’m – the sun has been out but I’ve still been whingeing because it’s really cold here so I’ve been in a dressing gown all weekend, hiding inside but it has been lovely and sunny which in itself obviously makes everybody I think happier.  So, today we’re going to be going into the group side of things.  It’s something that I think is incredibly important, especially with so many small businesses possibly being unaware of it but also how much small businesses actually make up a huge amount of schemes that are in place within the group insurance market which is just obviously incredible to see.  I think a big thing to maybe start off with Katharine – I think people kind of know what group insurance is but we don’t – some people don’t know it know it.  Can you maybe go through with us please sort of like what – give us a bit of a rundown as to about what group insurance is?

Katharine:    Okay.  Well employers will often promise certain benefits as part of the contract of employment and employer-sponsored death benefits, long term occupational sick pay and critical illness benefits are what we mean by group risk and some employers obviously will bear the cost of them themselves, they’ll self-fund it but many choose to take out insurance to cover their liability or their promise.  So group life assurance provides a tax-free lump sum on an employee’s death and it may include a taxable dependant’s pension but less so nowadays as they’re getting increasingly difficult to fund.  And this gives security for dependants of an employee at a time of great emotional loss and for many low to middle earners, group life cover through their employer might actually be the only life assurance provision they have which is not necessarily the best thing but at least they have something.

Group income protection provides an ongoing income to an employee if they can’t work for an extended period because of illness, injury or disability.  The employee remains on the payroll usually and so tax and national insurance continue to be paid and other benefits such as pension accrual will continue.  Group critical illness provides a tax-free lump sum on the diagnosis of the defined critical illness such as cancer and this could be used by the employee, say to pay for treatment, for home modifications, nursing care and so on.  Now, it’s important to remember that employers don’t have to provide any of these benefits so those that do play a really vital role in helping financial resilience, protecting savings and actually saving the State a considerable burden.

And on top of that, group risk policies come with all sorts of embedded extra support now that don’t cost anything for an employer but actually give employers, businesses, HR and employees support on a daily basis so things like an employee assistance program, maybe fast access to counselling and physio, a second medical opinion service, health apps, virtual GP services, rehabilitation expertise, HR advice and much, much more and you can imagine how helpful these support services have been through the pandemic and particularly the lockdown when people have had to find other ways of keeping fit and other ways of seeing a doctor.

The big thing about group risk protection benefits is that they’re inclusive and they will give most employees access to a generous level of cover at no or low cost and typically not many people will be asked to provide medical evidence and will get the cover irrespective of their state of health and that’s because group risk providers are a bit more relaxed about seeking medical evidence.  They’re looking at a pool of people not just one individual and so when we do look to capture medical evidence for people, we’ll seek to capture the top few earners within an organisation and even then we’ll only do it once and they should get a generous level of cover in any case without having to go through the process.

This is incredibly advantageous as you can imagine, not just for those people who might not be able to afford to pay for their own protection provision but those who have health conditions who might otherwise be declined or charged extra premiums under a consumer policy and it gives them easy access to this because the employer is the one that takes the advice on the benefit design, on the cover levels which they’ll align to their own business goals or contractual obligations or merely just on good practice so they might look at what other local employers are doing and try and match that.  The employer will take advice on the suitability of providers by way of a market review and this is a process that’s done regularly and thus keeps cost down and the design appropriate so you’ll keep up with legislation changes because your provider will help you to do that, your adviser.  A few numbers maybe?

Kathryn:       Absolutely, statistics are fab.

Katharine:    Okay, so over 13 million employees are covered by group risk policies and thus have this generous financial provision without having to personally worry about taking advice or finding it or, you know, dealing with whether it’s affordable, good value and so on and we do what we say on the tin.  We pay out – in 2019 – we’re just working on 2020’s figures so I can’t give you those but 2019, we paid £1.7 billion in claims to 26,000 people plus which is equivalent to £4.82 million a day.  We helped about 5,200 people back to work after a short period of sick leave before they became a real – or had real problems and we had about 75,000 interactions with the added value embedded help and support.  Cancer was the main cause of claim across all three products and we paid out around £100 million for Covid death claims during 2020.

Roy:            What a fantastic and comprehensive summary of the market!

Katharine:    It’s a bit lengthy [laughs].

Roy:            That’s brilliant Katharine.  I mean look, there’s so many fantastic subjects in there.  I think if we just pick through some of them to illustrate some of the benefits for our listeners.  I mean the first one that obviously people who do individual protection will be very aware of is the added benefits services that you’ve described.  In the main, they’re very similar to the individual side.  Over the last 12 months in particular with Covid, do you think the industry has come on leaps and bounds in terms of those services, in terms of not only being appreciated but being understood by clients?

Katharine:    I think so, definitely and communication’s key, isn’t it?  I always say, it’s no good having these things if you don’t tell your guys to use them and they really have come into their own.  I haven’t got the numbers yet but we are expecting the use particularly of employee assistance programs and online GP to have gone up exponentially over particularly the first lockdown when you really couldn’t do anything.  And I think they have been extended by providers so to more of a workforce than is necessarily covered by a policy for example in the recognition that these are really valuable services to people at the moment.

Roy:            And on EAP, just for our listeners –

Kathryn:       I have to have a turn Roy.  Let me have a speak.

Roy:            You will.

Kathryn:       [laughs]

Roy:            On EAP, it’s probably just worth – again with talking to people that might not have come across them before, could you give us a quick description of what EAP actually means and the practicalities of how it’s used by employers?

Katharine:    Okay, so it’s short for employee assistance program and I think there’s a bit of a misnomer out there in that lots of people think it’s only for use for emergencies so, you know, you would use it actually for, you know, relationship difficulties, getting into financial difficulties but it also – they’ll also – the services will also give a huge amount of information and help around things like avoiding flooding, dealing with flooding or emergency childcare or elder care – in fact I’ve used it personally for helping to source some emergency care for my own mother.  So I know it does what it says on the tin but mostly people will really value it for the mental health support that you get through these services and certainly some counselling that will be provided alongside the program.

And, you know, when we’re looking for employers – the Government’s looking for employers to really support their people in this area, this is a really easy way of accessing that support and, you know, it’s built into another product that’s really valuable and which will give some financial support in the event that it’s actually needed.

Kathryn:       I think one of the things I wanted to ask you about, was obviously what are the benefits to employers which I think you’ve gone through quite well and probably a little bit more in terms of like the medical underwriting.  So I think sometimes that can be confusing but I think a good way to maybe give an example as to sort of like the free medical underwriting limits to people is to – if you were to take me, for the life, CIC or IP side of things when it comes to group cover, so obviously I happily talk about my health all the time but just for anybody who does know, I have hypermobility syndrome, I have generalised anxiety disorder, both of which are not necessarily favourably looked at for income protection – it’s a lot better than it used to be but still there would be exclusions.  I have an underactive thyroid and I also have postural tachycardia syndrome which means that I have a fast heart and different things going on that way as well.

So typically if I were to try and get income protection on a personal life basis, I’m going to struggle to get that and especially not to have exclusions but when it comes to sort of like these free medical underwriting limits, as you were saying, it’s very inclusive so do you mind just explaining a little bit more about those levels please?

Katharine:    Okay, well we call it free cover.  It doesn’t mean it’s free of cost but it does mean it’s free of medical underwriting and as I mentioned earlier, would generally give a very basic – a generous basic level of cover to everyone within a group of employees without the need for providing medical evidence and regardless of their state of health.  So Kathryn, for your circumstances, so long as your benefit was less than that free cover level, you would be in, certainly for group life.

Kathryn:       Yeah. Without any exclusions?

Katharine:    No exclusions, no.  And you will find that there might be – for smaller groups particularly, there might be what we can an actively at work provision so you would need to satisfy that which basically means being – doing your normal job, normal place of work, normal hours and have not been told not to work by your doctor.  So for group life that would apply to smaller employers but generally it’s waived for larger groups.  For income protection – group income protection, that will apply the day before your cover starts and group critical illness is slightly different in that it’s largely provided on a voluntary basis and so generally we don’t underwrite that product but by a pre-existing conditions exclusion instead.  So that does work slightly differently.

Where we do seek medical evidence for higher earners, we try very hard just to do that once.  We arrived at a position some years – well many years ago now where we were looking particularly on group income protection to look at people’s attitude towards their health conditions, you know, are they managing it properly?  Do they take their medication?  Do they, you know, measure their blood sugar level for example in the case of diabetes?  And I think really attitude as well comes into it because generally you don’t get to be a high earner within an organisation if you’re not motivated to keep working and to work through anything that might be a bit of a nuisance to you health-wise [laughs] if that makes sense?

Kathryn:       Yeah, I think it does.  Thank you.

Roy:            Probably also worth pointing out Katharine, isn’t it, that the other great thing about a free cover limit is that if someone doesn’t want to be underwritten for the amount over it, they can still take the free cover limit?

Katharine:    Yeah, absolutely.

Roy:            So they can’t be worse off by – and that’s I think part of what the advisers should be doing, is always encouraging people, you know, to go for this – not always a medical is it?  Sometimes it’s just the questionnaire, you know, to fill that out anyway ‘cos you don’t go past go do you?  You don’t become worse off whatever, so that’s what we always say to people.

Katharine:    No, absolutely and, you know, execs are busy people and they don’t like spending time on these things rather than –

Roy:            They don’t like filling in forms as we all know!

Katharine:    They do not, they do not but you’re right, they will still get that generous level of free cover.

Kathryn:       And it can be extremely generous as well.

Katharine:    Yes it can.

Kathryn:       We’re talking into hundreds of thousands of pounds –

Katharine:    Yeah.

Kathryn:       With the life insurance.

Roy:            One of the situations we’ve come up recently here is sometimes you get that typical company that says, “Look, just cover all the guys at the top,” and what we actually point out to them is that if you cover everybody in your company, your free cover limit becomes greater, i.e. the more people you cover, relatively the more cover you get so it’s counterintuitive isn’t it?  You think, “Oh we’ll just cover the people at the top ‘cos it’s going to be a better policy, you know, for doing that and end up being cheaper,” whereas expand the needs does two things; firstly it gives you a better free cover limit which helps the people at the top but equally you cover people towards the bottom or at the start of their careers for things that they will never have had before.

Katharine:    Absolutely and I think often as well it can be cheaper to do it on a group basis than, you know, five or six exec policies for example.  So, you know, you’ll be bringing probably the average age of the group down and the average cost down –

Kathryn:       Absolutely.

Katharine:    By including everyone.

Kathryn:       Something I wanted to ask as well because I have this obviously – it’s quite well known that I speak with people quite a lot who have health conditions and I’ve had it a few times where people have come to me and said, “My employer offers life insurance through work and I’ve gone for it and I’ve had to fill out a medical form,” and obviously straight away my alarm bells go, thinking, “Well, hang on, if they’re offering that, why are you having to fill out medical forms?”  Because I can tell obviously by salary levels they’re probably not going to be going into – past the free cover limits and everything like that and they say to me, “Well I’ve had to do that or they’d decline me the cover.”  And I don’t know whether or not that is something that’s like unique to some group insurers or some group insurances or if it’s maybe a misunderstanding by that individual.  Can you explain how that maybe comes about sometimes Katharine?

Katharine:    Yeah, sure.  Obviously it’s difficult to comment without the specifics but there are some circumstances where free cover might not apply.  So for voluntary arrangements for example where membership isn’t compulsory but by choice or maybe for a flexible benefits arrangement where somebody chooses to take out life cover outside their normal window of being able to choose that benefit or where somebody is joining a scheme early or late, you know, after their first opportunity for example there might be a questionnaire asked for from people in those circumstances.  And it might be a short questionnaire, it might be four questions, tick, tick, tick, tick and you’re in but if you can’t tick all the boxes then we might want a bit more evidence and it might be used for people who aren’t actively at work on the day their cover started or the previous day for group income protection for example.  We talked about that just now.  They’re the small circumstances where that might apply.

And we’ve actually recently done some research on, you know, how many people have been impacted by that and if you remember the 13 million people plus that we cover, for group life assurance there were 78 people between January and the end of September last year who weren’t able to obtain group life cover for their immediate needs at that time and for group income protection there were 36 people who weren’t able to obtain their group income protection cover at that time.  So relatively small numbers but of course that doesn’t help the people it happens to which is why signposting is very important to the group risk industry as well as the individual industry.

Kathryn:       Absolutely.

Roy:            Now funny you should say signpost, as you’ve hopefully been reading over the last few weeks, we have self-styled 2021 the year of the signpost and I think the important thing to say about signposting, for all of us, is that it was never just about protection advisers, it was always about mortgage advisers, it was always about wealth management advisers but many people say actually it’s about employee benefit advisers as much as anybody else because there is a situation out there, isn’t there, where some EBs will look at certain schemes below a certain number and that’s just not their sweet spot, you know, the place they specialise in but equally there might be lots of individual advisers that are meeting smaller companies just in their day-to-day coming around and these might not be necessarily the sort of companies that would find an EB as well.  So, do you think signposting has opportunities – and I’m talking about from both sides, you know, for the EB market, in terms of people referring to them but equally them referring back to potential other specialists?

Kathryn:       I’m going to quickly butt in if that’s okay.  Just for the listeners who aren’t familiar with group, can we explain what EB is please?

Roy:            Employee benefit advisers.  So traditionally employee benefit advisers were companies who would look after historically larger employers, okay, so they would tend to have limits as to, you know, the numbers of people that they would look after and I was just very conscious of – I mean, those figures that you’ve mentioned Katharine, are phenomenal in terms of the amount of people that are covered but we do always need to be aware that 95% of companies in the UK are 10 people and less aren’t they?  So it’s brilliant for the big employers that have these but actually there are vast millions of people that just don’t have access and that might historically have been because of that level of serviceability.

Katharine:    Yeah, I agree and I think, you know, some employers don’t know what they don’t know do they?  And, you know, it’s not until the situation comes along when somebody is off sick for a length of time for example or somebody dies within the business that they think, you know, “Should we have done something about that?”  So I think serviceability is a really important thing but I think that employee benefits advisers – some will really see these markets as as important as their larger clients, you know. Smaller businesses don’t necessarily stay small do they?  They grow and, you know, many advisers will be set up in such a way that they do have arrangements in place to help smaller employers and that might be by pooling all their smaller groups together with one particular group risk provider for example where a smaller employer will get the advantage of the services that a larger employer will get and maybe better free cover levels for example.  What they might not get – or they won’t get necessarily is the full review of the market but often that could cost you more than any saving you might make by undertaking exercise at that sort of size.

So there are arrangements in place with most employee benefits advisers where they can help smaller employers and, you know, through offering a slightly more streamlined service help them to gain the advantage of the group market.

Roy:            Nevertheless, I think we’re probably saying there is still an opportunity here and I guess one of the questions that Kathryn and I get asked a lot by our individual colleagues is, “Is this a marketplace that we should think about getting into just because of the vast size of it?”  What would you say to a protection-only – individual protection-only adviser that was thinking of looking into group?

Katharine:    I’d say yeah, by all means certainly, you know, the more advisers the better.  You know, I think there are so many smaller employers out there who don’t have access to an adviser but where their execs might use a mortgage adviser and so there are opportunities to broaden that conversation out.  But I’d say don’t dabble.  Either do it, don’t do it or signpost it.  You know, there are some expensive mistakes to be made in this business and – but in the same way that you become an expert within your own field of knowledge, there’s no reason why you can’t do the same in terms of group risk and particularly if you’re already dealing with individual protection products, they’re not the same, they are different, you know, apples, pears, bananas maybe but you will have a reasonable understanding.  It’s just about due diligence, about finding out, you know, the CII do a qualification called GR1.  GRiD does a number of – or training on a number of levels so join GRiD, get the training and, you know, build up to it.

Kathryn:       I was going to say, that was the thing I was going to come onto next actually was that point of saying, “Don’t dabble,” you know, in a sense it is something where – especially if people have potentially protection on their lifetime allowance, it can be quite significant mistakes that can be made depending upon – in the life insurance side of things, the group life – whether or not someone chooses a registered or excepted scheme.  I’m wondering if it’s just worthwhile having a brief chat Katharine, about what the differences between those two options are?  Just in case somebody is dabbling a little bit in the group space so they know that they – so they maybe have some ideas initially as to try and avoid what could be a very, very nasty situation.

Katharine:    Indeed.

Roy:            I’m loving the word ‘dabbling’ on a Monday morning by the way.

Kathryn:       Careful.

Roy:            Fantastic, Monday morning word.

Kathryn:       [laughs] Dabble [laughs].

Katharine:    Yeah, group life historically fits within the pensions tax regime and the roots of this are steeped in history and go back, you know, to the year dot.  But that does bring complications around the lifetime allowance and pension protection and, you know, when we look back to A-Day, I can’t even remember how long ago that was.  Was it 2004?

Roy:            2006 wasn’t it?  Or 2004, it was a long time ago anyway.

Katharine:    A long time ago anyway.  So that was supposed to simplify it really but for me I just think it further complicated matters and particularly the fact that somebody can use – lose their pension protection just by joining a registered group life scheme.  So many employers will use an excepted group life policy for their high earners and excepted group life is the group version of a relevant life policy which most of your listeners, I’m guessing, will be familiar with.

Roy:            Yeah.

Katharine:    And they might just use it for their high earners or they might use it for everybody because, you know, particularly when you get to any sort of size, are you really going to ask each new hire about their pension protection, particularly, you know, when they’re not at exec level?  You know, I’m not sure that you’re going to be doing that as an employer so maybe it’s safer to pop everybody in for an excepted scheme but there are disadvantages to doing that as well in that there’s a number of criteria that must be met and also there are potential charges – tax charges at entry, every 10 years and on exit on the discretionary trusts that are used primarily to distribute the proceeds tax-free.  So GRiD and the Access to Insurance group are campaigning for the removal of those tax charges under excepted group life policies because they’re mainly arbitrary, they raise very little for HMRC but they’re incredibly expensive for employers in terms of taking legal advice and it really would result in a simplified way for employers to provide life assurance for their people.

Roy:            So we should probably give a live example shouldn’t we, Katharine?  Let’s say we had a person that had multiple salary, death in service, that took them up to five or six hundred thousand pounds if they were to pass away at work and then they had a pension benefit that was over – took them over £1.1 million, which is the current allowance currently, that would result in a 55% tax charge.

Katharine:    Yeah.

Roy:            So this is a really punitive tax and one of the problems there you quite rightly pointed out is that not every employer is going to be aware of someone’s past pension arrangements, particularly if they’ve had a final salary scheme because the way final salary schemes are worked out is slightly different to others.  One of the dilemmas here talking to employers is that they would quite rightfully turn around and go – not only do they probably not know but they probably – it’s none of their business to ask that question and therefore sometimes you do get this sort of, you know, proverbial brick wall plus of course, it’s not as simple as I’ve just described because any pension growth – so growth within your pension fund could equally take them over £1.1 million and as we all know, in the recent budget, the Chancellor has frozen that limit, you know, certainly for the next three or four years – maybe for longer, so more people than you’d expect fall into this trap – if I may call it a trap.

Katharine:    Yeah, definitely and, you know, the question is who pays that 55% tax charge?  You know, is it the responsibility of the company, the trustees or the beneficiaries as well?  So, you know, there’s that complication as well to consider.  So as I said, many employers are going straight into an excepted group life policy for everybody that they employ.

Kathryn:       It becomes quite scary actually a little bit as an adviser actually because if you are advising on group and then obviously, as you say, somebody that you’re helping with a scheme suddenly employs somebody and there’s – that conversation isn’t happening, you’re not necessarily going to know that somebody’s entered into the scheme.  It’s kind of a case of well where does their – if there’s any kind of fallout, which – there’s bound to be fallout somewhere, whose fallout is it?  Is it the employer?  Is it the adviser?  Is, you know, where does that happen and I think that’s why it’s so important.  Like you were saying, I’m going to say your favourite word again Roy, we don’t dabble.  We make sure that we get the good training, especially from places like GRiD and make sure that we are really feeling as if we are on top of knowing all these little intricacies.

As with anything, there’s always intricacies in these things that we need to learn about.  So obviously – as everybody knows, I do the protection side of things, I don’t do investments, I don’t do pensions.  I would be absolutely terrified of suddenly going like, “I’m going to do pensions and I’m just going to start to dabble a little bit and see where I go.”  I think that would be – that seems like the worst idea I could possibly ever do so I think it’s incredibly important that people do take that step to really take the training before they start to go into it. But it is –

Katharine:    Well absolutely.

Kathryn:       It is really worthwhile doing.

Katharine:    Yeah and, you know, this is regulated business by the FCA as well so, you know, you need to demonstrate competence so there’s that as well.  And the thing about group risk is, you know, the concept’s really easy isn’t it?  It’s really simple, you know, you die, we pay you, you’re off sick for any length of time, we pay you, you get a critical illness, we pay you but the regime it all sits in is incredibly complicated and can be a disincentive for employers and for advisers.

Kathryn:       Absolutely.

Roy:            In terms of the fear factor, you know, that’s something that a lot of articles have been written about and I know Rob Wheatcroft who is a bit of a God of the industry has been talking about this recently as well.  The fear factor shouldn’t be something that precludes people from – let’s remove the word ‘dabbling’ and let’s say going into this business properly.  Would you say that that just reinforces signposting though because – isn’t this the whole point about our industry should be joining together in so many different ways as a united force and not everyone’s going to expect the adviser to be the expert to your point Katharine, at the pension, at the protection, at the group – at the everything else and actually if we come together as an industry and you might have two or three advisers within your signposting group – no corporate company is going to have a problem with that presumably?

Katharine:    No, not at all.  You know, you’re just providing expertise.  You know, we don’t have a problem when we use a solicitor with also using a barrister do we?  We don’t have a problem when we go to our GP and get referred to a consultant.  So why should we have a problem if we go to our adviser and get referred to a specialist within the area that we need?

Kathryn:       It’s a brilliant example, a brilliant sort of like comparison there actually.

Roy:            Could we ask you about early intervention services ‘cos I think this is a subject where, you know, I’ve got feet in both camps as you know where I’d say the group side of our business has done fantastically well particularly recently and particularly over the last year or so with mental health and wellbeing whereas I think Kathryn and I would both agree the individual side probably – what’s that famous phrase from school?  “Must do better,” is what I got told quite a lot but could you give us an example of early intervention and why it’s worked so well on the group side?

Katharine:    Okay.  Well we sort of started this journey some years – well many years ago now – I’ve been working for quite a long time now, where we looked at, you know, in the old days you had a group income protection policy and somebody would be off sick for six months and you’d get the policy down, dust it off, you know, write to the insurer, phone the insurer and say, “Oh I’ve got somebody who’s been off for six months,” and the insurer would then start gathering medical evidence to support a claim which could also take six months and, you know, in the meantime this poor person is in receipt of nothing and so we started to move away from that and to look at, you know, what is somebody capable of?  You know, rather than focus on the disability, the illness, you know, what is it that is preventing them from getting back to work?  And many times it would be, you know, they couldn’t access treatment and so we began to think, “Well, you know, what if we made that a bit easier to access?”

And, you know, roll forward many years and the next stage on that journey was really to think, “Well okay, let’s start intervening, let’s start meeting with somebody, you know, in their first month of absence,” because it was becoming very clear that, you know, when somebody is off work for six months or more, the chances of getting them back are fairly slim, you know, if they’ve become really embedded in this absence and so we really do see the value of all these interventions that we provide and the extra services that we provide.  They’re all intended to help people deal with not just illness but things that distract them like simply moving house for example – there is a big load of stuff around moving house so let’s try and keep that easy for somebody and give them the help that they need with that and, you know, particularly around mental health conditions, around musculoskeletal conditions, let’s get them that treatment, let’s get them into some counselling, let’s get them into some physio.

And the next stage in that journey was well, okay, let’s look at ways that we can prevent somebody going off ill.  If somebody knows how to sit properly at their desk for example, that’s going to save them an awful lot of backache and so I think we arrived at this point some years ago where we were ahead of the State in looking at, you know, how to help people get back to work or stay in work and not be absent in the first place and it really does work.  You know, the 5,000-odd people that we got back to work within a relatively short time-space during 2019 sort of demonstrates the effectiveness of that and at the end of the day it will mitigate claims and it will keep employers’ premiums and costs down and it really is worth doing.  But we have quite a long deferred period within which to do that whereas that’s not necessarily the case on some individual policies is it?  So I can see why that might not be attractive to an individual provider necessarily but certainly in terms of mitigating the longer term claims, I don’t see why there would be any difference.

Roy:            Yeah, I think that what frustrates the likes of Kathryn and I and other people on the individual side is when you have someone who rings you up in the early days, typically a 13-week, 26-week deferral and says, “Look I do anticipate a claim,” and we try and ring the insurer on their behalf and we get the, you know, the statutory response is, “Well come back when the deferral period is up.”  Which is just outrageous if you think about it.

Katharine:    Well I – sorry.

Roy:            Yeah, so I just always thought, well hang on a minute.  If I make that same phone call to a group provider who often by the way could be the same provider, you’d get a completely different attitude and I think the other great thing for early intervention from an HR point of view is that particularly with mental health and wellness, which is quite rightly the thing that, you know, takes front of house and is now no longer the taboo subject it was, with a smaller company where the HR capabilities, you know, might be limited or if at all, the fact that they have that help in particular with mental-related claims is just a godsend to those sort of companies because obviously they don’t have the skillset to deal with it themselves whereas you can pass it over to an insurer who has the qualified counsellors and psychotherapists and psychologists and all that sort of stuff and I always think it’s just a bit odd that we don’t do that on the individual side when, you know, the biggest cause of claim is mental health now.

Katharine:    Yeah, no it’s difficult to comment really from my perspective because it is so effective and we do find it works and – but also it’s, you know, for those claims where it will go through to a claim then we’ve started gathering the medical evidence we need to support that claim much earlier which –

Roy:            Much earlier, yeah.

Katharine:    Yeah, by the end of the deferred period, nobody’s left in limbo and their claim can be paid at that point rather than three, four months later when you’ve, you know, left it to gather the evidence in.  So I, you know, on both counts, I don’t see there’s a way to lose really.

Roy:            You’re preaching to the converted, isn’t she Kathryn?

Katharine:    I know, I know.

Kathryn:       Absolutely.  This has been absolutely brilliant Katharine, thank you so much for coming and sharing the insights and everything.  Those statistics were very sobering.  Obviously they are sad but they are a real testament to what these insurances can do and I do think it’s really important that as advisers we do look for these opportunities.  As something I always say to my team, is when you’re chatting to somebody as part of our – obviously any adviser’s factfinding is to ask about the occupation and you immediately – you make sure very subtly early on, “Do you have your own company?”  And that should just be part and parcel really of any adviser’s call because it just brings up so many opportunities.  They can help obviously the client but also there’s quite a significant opportunity for the adviser as well.  So thank you very much for coming.  I’m –

Katharine:    My pleasure.

Kathryn:       I’m going to be back next time with Matt Rann and we’re going to be chatting about diabetes and insurance so if anybody would like a reminder of the next episode please drop me a message on social media or visit the website, www.practical-protection.co.uk and please don’t forget that if you’re listening to this as part of your work, you can claim a CPD certificate on the website too.  Thank you so much for joining us today, Katharine.

Katharine:    You’re welcome.

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