the opportunity in group risk. an introduction to unum we are unum (pronounced yoo-num) and we’re...
TRANSCRIPT
The Opportunity in Group Risk
An Introduction to Unum
We are Unum (pronounced YOO-NUM) and we’re one of the UK’s leading financial
protection insurers and have been for over 40 years
We insure:
47 of the FTSE 100
1.6 million people in the UK
As at the end of 2013, we paid:
£320 million in claims
more than £6 million a week in benefits to our customers – providing security and peace of mind to individuals and their families.
We have a financial strength rating, Standard and Poor rating of A- (Strong)
Disclaimer
Has been designed for a Broker audience with knowledge of financial products and nothing from it should not be used with customers or as a sole basis for making decisions on selling products
Uses examples to demonstrate products, but these are for illustration purposes only, for actual customer illustrations please contact your group risk provider
Terms and conditions apply to all Unum products highlighted in this presentation and they may differ from provider to provider and overtime
Unum is not authorised to give advice. The material contained in this presentation applies only to Unum and its products. Whilst we have taken all reasonable steps to ensure that the information within this presentation is accurate and up-to-date, we cannot accept liability for any error or omissions.
Unum Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority
The following presentation:
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An Introduction to Group Risk – Learning Outcomes
You should be able to talk to your customers about Group Income Protection and overcome many of the objections that employers may have about Group Risk products.
This session will also give an insight into the opportunities of selling Group Risk products on the back of Auto Enrolment as well as highlighting some of the benefits of selling Group Risk from the adviser viewpoint.
By the end of this session:
Group Risk is an umbrella term for three employer sponsored benefits:
• Group Life
• Critical Illness Cover
• Group Income Protection and Sick Pay Insurance
These products give employees access to preferential terms over and above
individual cover they could buy themselves:
• Cover is available where there are pre–existing conditions
• Little or no medical evidence required
• Reduced rates due to spread risk
What is Group Risk?
UK lags behind other developed countries in Protection Index
Sources Demos (2011) Of mutual benefit
Employee coverage for GIP Employee coverage for GL
Sources: DWP - Labour Force Survey, June 2014Swiss Re Group Watch report, 2013
Potential clients
19 millionfull time employees
Insured
2m
Insured
8.5m
19 millionfull time employees
UK Group Risk Market – The Opportunity
Where to focus
State benefits may replace lost income
‘Squeezed middle’ • High dependency on
income • High outgoings limited
savings
High Income, Savings and investments
UK Private Sector income profile- The RDR effect
Source: DWP (2014) Households Below Average Income
6.9%
• Many high-net worth clients already taking advice will be company
owners or hold high level positions
• They have access to key decision makers within the company
• Their concerns are likely to include: -Competition in the talent market
-Business continuity
-Risk management
• You could be making the most of your current relationships to:
-Close the protection gap
-Bring greater value to your clients
-Improve return on client
-Improve client retention
From Personal to Group
AE – How Group Risk can help employers and complement the pension scheme
Pension Contribution Cover is the liability taken care of if an employee is unable to work
Life Cover for dependants should their loved one not survive long enough to secure a good pension
Income for employees to continue to fund their own contribution to their pension when the worst happens and they cannot work
EAP/Legal services to support both employer and employee through difficult times
For many businesses, Auto Enrolment (AE) changes their relationship with their workforce. This provides the opportunity for employers to review their benefits packages and strengthen their businesses in the process.
Sources: 1. ONS (2013) Business populations report; Swiss Re (2012) Group watch report2. DWP (2011) Health at work – an independent review of sickness absence3. Macmillan Cancer Support (2013) The rich picture on people of working age
with cancer4. ONS (2012) Adult Health in Great Britain
The need - Incapacity and death figures during working life
You are 3 times more likely to be off long term sick in your working life than die1
Each year, over 300,000 people fall out of work onto health-related state benefits – 11%
of the workforce2
119,000 working age people are diagnosed with cancer each year3
35% of 16-44 year olds and 39% of 45-64 year olds report having a long standing illness4
You are 3 times more likely to be off long term sick in your working life than die1
Each year, over 300,000 people fall out of work onto health-related state benefits – 11%
of the workforce2
119,000 working age people are diagnosed with cancer each year3
35% of 16-44 year olds and 39% of 45-64 year olds report having a long standing illness4
Simply put, the best way for people to get Income Protection is through their company
Affordability
Availability
Accessibility
Acumen
Self Thru work
??
Still, there is an imbalance in employers’ current emphasis on Group Life over Group Income Protection
• Basic life coverage (1x - 2x salary)
• Essential GIP coverage
• More GIP solutions to meet all budgets
Common Practice Life = 4 x salary Future State Life = 2 x salary + IP
• Life coverage which is too rich (4x life plus dependent)
• No GIP coverage
Incapacity is 3 times more likely than death during your working life1
1Source: ONS 2009 (2007 data), Unum Analysis
Life GIP
Life
Value of Income Protection – Achieving balance with Group Income Protection
The Return on Investment for an employer comparing spend on Life only with the same spend spread across Life and Income Protection
Employer • Recruit and Retain
Employer• Recruit and retain• Expert absence management• Return to work expertise• Rehab support• Third party validation• Certainty of cost
Life OnlyEmployee• Peace of mind• Dependants provided for
Life and Income ProtectionEmployee• Peace of mind• Dependants provided for • Financial support when sick• Return to work support• EAP everyday support
Benefits from Life Only
Benefits from Life and Income Protection
The mythsGroup Income Protection
Mythbusters
Myth 1: Income Protection is for a few
Reality: It’s the single most important insurance one can get
Without your income, you can’t pay for your outgoingsOther insurance policies will soon lapse if you don’t have the money to pay the premium
Myth 2: Employees don’t value it
Reality: You are 3x more likely to have a long-term illness than die in your working life1
•They don’t know about it - but
•On average over the last 10 years, 2.6m have been off work >6 months and claiming benefit – 1 in 10 of the workforce
1Source: ONS 2008
Mythbusters
Myth 3: It’s too expensive
Reality: CEBR research1 quantified an average return of 48p for every £1 of Income Protection plus 28p/£1 corporation tax
GIP covers salary costs (up to 80%)Return to work support reduces loss of productivity and temp costsFrees up HR time and effort
Myth 4: The State will provide
Reality: People receive very little from the State
• Typical: ~£5,200 per year2
• Severely disabled: ~£11,000 per year3
• Very rare cases: ~£34,000 per year3(severe work related disability, poverty, many dependents, and the need for full time care)
Sources:1.CEBR, 2014 The benefits to private sector employers from the adoption of Group Income Protection as an employee non-salary benefit 2.DWP, 2014 (Based on weekly rate of ESA) Tax and welfare benefits can change. Further info available from HMRC3.http://www.entitledto.co.uk/benefits-calculator (2014)
Sick Pay Insurance
Sick Pay Insurance
Kicks in within first 4 weeks of absence
Benefit payments range from 12 weeks to 52 weeks
Meaning that you can choose benefit payments to complement existing arrangements
Sick Pay Insurance bridges the protection gap
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Absence Rates
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Up to 7 days 8 days to 4 weeks 4 weeks +
1-49
50-249
250-999
1,000-4,999
5,000+
Source: CIPD Sickness Absence Report 2013Source: CIPD Sickness Absence Report 2013
Number of Employees:Number of Employees:
Sick Pay Insurance covers the cost of short-term absence
• Supplements Statutory Sick Pay (payable up to 28 weeks)
• Replaces Occupational Sick Pay arrangements
• Consistent third party validation of absence
• Ensures Duty of Care obligations are met
• Easy, online absence tracking and submission
Sick Pay Insurance
What do Sick Pay Insurance and Group Income Protection offer
employees and employers?
Employer Hierarchy of Needs
How can GIP help?
Questions you should ask employers:
• Tell me about the benefits you provide
• How do these benefits fit with your business needs?
• How do you keep up to date with the latest employment law requirements?
• What do you do if one of your employees goes off sick?
• How does this impact your business?
• What are the nature of the absence problems?
• What are the likely causes of the problems?
• What steps are likely to be most effective at addressing the problems?
• How do you prevent the problems from recurring?
• How would you feel about a solution to better balance benefits?
Conversation starters
Tailored Cover for Differing Needs
Options for all budgets
Capital option5 year payment term
65% of salaryLump sum to cover settlement
Pe
rce
nta
ge
of
Sa
lary
Pa
id
80%
65%
50%
0%
Day 0 Wk 4 Wk26 Yr 5 StatePension AgeTime since 1st Day of Absence
ClassicPaid to State Pension Age
80% of salary
Sick Pay Insurance1 day to 4 week deferred
period50% of salary
Typical payment period 22 weeks
Terms and conditions apply. Cover depends on policy.
Increasing Cost to Employer
Employee Assistance Programme
• HR and Manager Helpline• Absence Management Support• Legal Advice• Creation of Employment Contracts• Help with Duty of Care obligations
• Practical, Confidential Information• Support for Work / Life Issues• Face to Face Counselling Sessions • Blended Cognitive Behaviour Therapy• Support Guides and videos
Employee Assistance Programme
Employer Employee
What’s in it for employers? – reasons to buy
Financial Protection
benefits for employers
Financial benefitsFor employer and
employee
Visible, valuable employee benefits attract
and retain talent
Free legal guidanceFor employer
Legal documentssave £££’s
in legal costs
Support for employer’s Duty of Care
Expert resource to help manage and
reduce sickness absence
Increased productivity/profitability
Return to work planning and management
What’s in it for you?
Examples of Group/Personal Income Protection Personal Income Protection Group Income Protection
Illustration based on
45 year old business owner Income £60KBenefit of 50% of salary (tax free)Cover to 6826 weeks deferred period
Small business – 10 peopleTotal salary roll of £542,000Benefit of 66.67% of salary (taxed through payroll) RPI 2.5% capCover to 70 26 weeks deferred period
Max Benefit Max initial benefit up to £250k per year or up to 50% of gross earnings
Max initial benefit up to £350k per year or up to 80% of employee’s gross earnings
Access to cover Requires full Medical Underwriting Free Cover Level (FCL) ** £70,000 benefit(Once and Done >20 lives)
Pension Contributions No cover Can be covered up to lower of 1/3 of salary or £120k
Assistance Programme
included?Personal
Personal and Business including line manager, business legal and documentation services
Typical annual premium* £1118 £5594
Annual CommissionOption 1 : 130% of Lautro, 3.25% renewalOption 2 : 21% level*
£234.78*
12-20% level
£671 - £1119
* Illustrative costs will differ for companies with different demographics and benefits** Guaranteed level of cover for all members without Medical Underwriting, benefits over FCL will be subject to medical underwritingTerms and conditions apply
Group Income Protection Commission Table
• Commission rates of 20% may mean an increase in the annual premium paid• *based on a 2% salary roll increase
Timeline Premium* Commission @ 12%
Commission @ 20%
Year 1 £10,000 £1,200 £2,000Year 5 £10,824 £1,299 £2,165
Year 10 £11,950 £1,434 £2,390Year 1 £100,000 £12,000 £20,000Year 5 £108,243 £12,989 £21,649
Year 10 £119,509 £14,341 £23,902Year 1 £500,000 £60,000 £100,000Year 5 £541,216 £64,946 £108,243
Year 10 £597,546 £71,706 £119,509Year 1 £1,000,000 £120,000 £200,000Year 5 £1,082,432 £129,892 £216,486
Year 10 £1,195,092 £143,411 £239,018
What’s in it for you? – Reasons to sell
Benefits to working in the
Financial Protection
market
Increase clientretention/loyalty
Helps defend core business from
competitors
Further contact with clients
Help corporate clients to cut costs
Lower cost of sale by targeting
existing customers
Develop a broader holistic
offering
Good fit with core business
Additional incomethrough offering
additional services
Summary of Group Risk
Group Risk comprises of 3 key products: • Critical Illness - Lump sum in event of certain critical illnesses• Income Protection - Proportion of salary after a deferred period• Life Insurance - Lump sum on death
• Group protection is easier and cheaper to quote for than personal protection due
the risk being spread thus reducing the requirement for medical underwriting
• Employers get a greater return on investment with income protection than life
cover
• Large potential market in the UK, especially for income protection
Key facts to take away:
Handset question
1. Yes please call me - I write group risk already
2. Yes please call me – I have business clients but don’t do group risk
3. Yes please call me – I would like to know more
4. No thanks
Would you like us to contact you?
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