Choosing an Employee Benefits provider is a big decision. The big challenge for managers and business owners is they may not know whether they have made the right choice until the time comes to make a claim. In this article Chris Weldon, Chief Underwriting Officer at Zurich Integrated Benefits, offers his expert opinion on some of the key issues employers should consider during the decision-making process.
The problem with buying any type of insurance is that it’s intangible. You will only know the value of the transaction at the end of the insurance period, and even then it might not be clear cut. Therefore, the insurer you purchase from is an important choice.
This is particularly true of employee benefits. With your group life policy, if you have 200 employees, on average you might only expect a single death claim every six to eight years. Now you might be lucky or unlucky and have more or less than this, but you could go through a number of years doubting the value of what you have bought.
However, the risk of having to find what could be hundreds of thousands of pounds from your company’s balance sheet once every eight years can be mitigated by sharing the burden of risk with other companies through the insurance company.
In the unfortunate event of having to make a claim, the insurer needs to deliver. Unfortunately, customers of some insurers do experience problems at this crucial point. Claims that have been declined or have taken an extraordinarily long time to pay often leave a bitter taste. After all, what is the point in purchasing that promise if it isn’t delivered quickly and efficiently, particularly at a time of grief for both the employer and the employee’s family?
Declined claims are more common for some types of insurance, such as travel insurance, but when it comes to life policies, this should be relatively rare. When insurers decline death claims it’s usually for one of two reasons. There’s either some sort of exclusion on the policy, or there is an administrative issue in the data supplied to the insurer.
For group life policies, there should not be many exclusions on an individual member’s behaviour. That is important with retail contracts where the anti-selection effect is more dominant. Often insurers where group life is a sideline still leave in place their retail restrictions, leaving employers with a liability if an employee died, for example, while on holiday.
In the case of administrative issues, it is often the case that a member might have been missed off the census that was sent to the insurer, or maybe because they were off on long-term sick leave, or on secondment in a different country. Honest mistakes happen, and some insurers, particularly where there is a long-term relationship with the employer, might well take this into account when adjudicating a claim.
However, those with a claims philosophy of strictly abiding by the terms and conditions might not. In an extreme example, a claim may be denied due to the insurer not having put a member on the policy because of a processing backlog.
The feedback from recent customers suggests that some bad experiences, both on a claims front, but from other service issues too, are leading to a ‘flight to quality’ with long-standing, well regulated, and experienced group life and disability companies. Information on claims acceptance rates, general servicing turnaround times, and financial sustainability should be publicly available for consideration.
In conclusion, while often the purchasing decision is dominated by price, and maybe sometimes the level of medical underwriting needed for senior employees, a better question might be ‘will this insurance pay out when we need it?’.
To ensure that it does, you need to choose an insurer that will be there in the future, one that offers a complete insurance product without unnecessary restrictions, one where you understand the claims philosophy and that can quickly deliver when the time comes.
As so often in life it is a trade-off between price and quality, and it is important to understand this at the time of purchase, as it might be years before you discover it’s importance. The price difference is often small, especially for smaller employers, and the cost of getting it wrong can be hundreds of thousands if a claim is not paid.
