Insurers need to come up with more innovative products than simple gold, silver, and bronze versions, to reach out to potential customers who currently are not being served, according to Nick Potter, acting CEO and chief financial officer at Simplyhealth.
Potter was speaking at the ABI annual conference 2024, which took place at the Queen Elizabeth II Centre in Westminster, London earlier this week.
“We need to make sure our propositions are modular so people can build up,” he said. “In the past, if you were lucky, it’s been gold, silver, and bronze. Often, that has excluded a lot of people.”
“I think we’ve got to break that proposition down into more modular benefits so that people can buy in at the level they can do, and not get excluded.
“There is a disadvantage for a lot of people just not being able to get their foot on the ladder in terms of insurance and protection.”
Taxation
Speaking on the level of tax associated with insurance, Potter said that the return that insurance companies make on their premiums can be very low, with a company perhaps making £50 to £75 on a premium of £1,000 after paying claims and operating costs.
“That’s what that business who’s taking all the risk is going to get out,” he said.
But after other taxes such as 12% insurance premium tax (IPT), national insurance, and tax that the employee may have to pay, the end result could mean the company is actually paying £1,500 for a lower tax-rate employee, or more than £1,700 for a higher tax-rate employee,” he said.
“At the moment, how can we possibly be paying, you know, £1,750 when we’re really only going to get a thousand pounds worth of premium coming out of it?”
He said: “There’s just an inequality there that’s just hidden within the tax structure.
“I think it’s so important that the ABI and all the other businesses come together to say we need to do something about that.
“I don’t know what the answer is, but we should be asking those questions just to say how do we reduce that tax burden on companies so they can feel they can make that investment in their workforce and get a valid return.”
Sick pay
Another issue is sick pay, which is lower in the UK than in many other European countries.
“At the moment in this country, sick pay is pretty low when you compare it to some of our European neighbours,” Potter said.
“And where you see those higher levels of sick pay, businesses are doing more in terms of the wellness of their workforce because there’s something of quite a big disadvantage in terms of the sick pay they have to pay when they’re off.”
“I think group income protection would probably play a role in that as well. But I think health and wellbeing is not just about physical, it’s mental.
“And some of that mental anxiety you see, especially with some younger people, is driven by the financial issues they’re facing socially.”
“I tell you what, I thank God I’m not a 20-year-old coming into business today.
“And if I can talk about our industry, I don’t think we have got ourselves into the space to offer the products and propositions needed to help that generation comfortably flourish.”
