The world of work has seen enormous disruption as a result of Covid-19. As restrictions are gradually lifting, we are looking to a future where hybrid working is becoming far more normal, although it is as yet untested.
I strongly believe this new world of work presents an enormous opportunity for our sector to help employers build a productive, healthy and happy workforce, and to support government objectives at the same time.
But to do this, we need to have a much more robust evidence base about the real-world benefits of our products. And we need to improve trust in our sector, and continue to innovate.
Government is increasingly focused on protecting the health and productivity of the UK workforce. Even before the pandemic, the economic cost of sickness and worklessness was estimated at a staggering £130bn a year, costing the exchequer £55bn a year.
And government will be looking to employers to help solve the problem, with insurance products presenting a powerful tool to do so.
The last year saw a record amount paid out to help families cope with bereavement, ill health, and injury. But while this quantifies the support our products provide to families in monetary terms, it does not explain how insurance has actually supported the health of customers, or what the outcomes have been for employers.
This is likely one of the key factors behind some of the results from research by the Social Market Foundation (SMF) that the ABI has published this week.
Making cover relevant
The SMF research carried out a survey of HR decision makers within businesses. Far and away the two main reasons for employers not providing insurance cover to employees were cost and a lack of relevance.
Almost a third of businesses said the benefit was “not relevant to the business” and more than 30% cited cost as the main barrier, with that figure rising to almost 45% for private medical insurance (PMI).
Part of the reason is that currently, workplace insurance benefits are primarily seen by employers as recruitment and retention tools, rather than as support for employees’ health and wellbeing.
If we can’t articulate and demonstrate the real-world health outcomes and productivity benefits of our products to all, this is unlikely to change.
Yet, we know that insurance products most definitely support healthy working lives.
They deliver health interventions that keep people in work, help them get back into work if they have been ill, offer mental health support, and pay a replacement income if someone is too ill to return to work.
The SMF’s research showed that employees very much value the products if they have used them.
Eight in 10 (82%) of respondents who had PMI at the time of their absence from work due to injury or illness described the product as “indispensable” or “helpful”.
For income protection this was 78% and for health cash plans it was 76%. Those are encouraging figures, but it is a problem that value is only seen when the products are used.
It means most employers will ignore insurance products, as the yawning protection gap shows – less than 10% of the UK workforce of over 27 million workers have group income protection cover.
‘Measure and demonstrate true product impact’
So, what can the industry do to show employers and government the true benefit of these products?
In my view, we need to do three things: address trust, continue to innovate, and measure the true impact of our products, rather than “claims paid”.
Although our industry pays over 98% of claims, over half of our customers don’t believe those statistics.
Banks are now more trusted than insurers and there is an expectation gap between what insurance customers believe is covered and their actual experience.
This expectation gap also colours the viewpoints of policymakers and opinion formers who are, of course, also consumers. Addressing it is critical to rebuild trust with our customers.
Innovation and trust go hand in hand. As a sector, we must harness innovation to meet our customers’ changing needs. But we must do this in a way that they can trust, for example in our use of big data and machine learning.
Finally, we need to measure and demonstrate the true impact of our products, rather than focusing on percentage of claims paid and pound figures.
While important, this does not speak to policymakers and their objectives.
Instead, we need to demonstrate the wider impact of our products – the number of workers returned to the workplace as a result of rehab services, the number of working days not lost to mental illness and so on.
This will help us change the current perception among businesses that insurance is primarily a way to recruit and retain talent and so a nice to have if you can afford it. We need to show employers that insuring their workforce is an investment in their health, wellbeing and productivity.
This is why we at the ABI and our members want to go beyond claims paid. We are working together to better evidence how insurance supports positive health outcomes, keeps people in work and returns them to work when they do fall ill.
Demonstrating the true value of our products in this way will play an important part in helping us change the perceptions that hold employers back from doing the right thing for their workforce.