Guidance issued to group risk insurers to not include third party service level and supplier agreements in contracts with employers should not be considered anti-competitive, Group Risk Development (Grid) has said.
The body said insurers were free to make their own decisions about the situation and it does not dictate to members, but acknowledged that rejecting contracts could lead to potentially difficult situations with clients.
Speaking to Health & Protection, Grid spokesperson Katharine Moxham said the problem was seen as a significant one but could not give specific figures on its scale.
“I do understand that it is a big issue for the industry causing some difficulty,” she said.
Discussing the guidance, Moxham continued: “It’s generally intended to be helpful. It’s not really intended to be controversial or negative or to negate the need for due diligence.
“It is just outlining why insurers really would find it difficult to sign such agreements. We do take great care not to act in an anti-competitive manner.
“This is guidance and firms are entirely free to make their own commercial choices.
“There won’t be any collusion – each insurer is free to make their own commercial decision,” she added.
And Grid will not sanction an insurer who goes against the guidance and signs such an agreement.
“It is entirely their own commercial decision to decide whether to sign or not. And they will take legal advice on that I’m sure,” Moxham continued.
“Grid doesn’t dictate anything to its members. We try and look at this type of situation and provide some guidance, but our members are able to do whatever they feel is right.”
Moxham acknowledged there could for example be situations where an insurer could put itself out of the picture for some part of the business without an agreement, and therefore decide to sign.
“That is a commercial decision they are entirely free to make,” she added.
Importance of added services
The growing importance of these additional and value-added services attached to insurance products is one of the reasons for this increase in demand from employers.
But Moxham stressed that these extra benefits are non-contractual and are provided by the insurer in an effort to give some extra value from the insurance purchase.
“Their services are intended to complement the insurance, but they are non-contractual,” Moxham said.
“So the insurer can change them, they can withdraw them at any point in time – not that they make a practice of doing that, but they can.
“This is why it’s not really appropriate to sign a procurement document on behalf of the service that insurers are offering, because it’s not a service run by the insurer.”
The services, however, have become more valued since the pandemic.
“The online GP service I think has proved incredibly useful for many, many employers. The fact that it’s 24/7, for example, means that people don’t have to take time out of the office or away from their job,” Moxham agreed.
“So, I think the value of that has increased exponentially.”
Push-me, pull-you
However that is not to say insurers will not help clients go through their due diligence for third party providers.
“Insurers will help new customers with that process, just so that they can be confident that they have chosen a reputable firm and ESG very much comes into that,” Moxham continued.
“On the other hand, they are highly unlikely to adapt their way of working, which – let’s face it – covers many thousands of policies. They’re not going to adapt the way they work to suit a specific client’s requirements.
“Neither will they extend audit rights or allow people to look at IT systems, because it’s contravening the confidentiality and their security.
“So it is a push-me – pull-you situation. It is quite difficult.
“The document we produced is to really to sort of help procurement teams understand the nature of what they are buying here and to understand that it is highly regulated,” she added.
Impasse the biggest danger
Still, there are likely to be some difficult situations with problems ahead if insurers adopt the guidance practices.
“I would imagine it is a difficult situation that we find ourselves in as nobody likes to say no to a client,” Moxham said.
“Equally no one wants to compromise their own position by signing something that is inappropriate.
“The biggest danger is that there’s an impasse between the insurer and a potential client. That can be a difficult situation to manage.”
Though she had not yet got any feedback from insurers, she felt there could be problems ahead.
“I think it’s going to cause a problem for quite some time,” Moxham said.
The guidance is to help companies to better understand why insurers would not want to include third party services in their contracts.
“This is just setting out for a procurement team to look at to understand why insurers might not want to sign this agreement,” she said.
Old advice
Moxham also noted the advice was originally issued more than a decade ago but was revisited in the latest update.
“The work that we’ve done recently is a revisit of the work that we previously did jointly with The Chartered Institute of Procurement & Supply (CIPS).
“It was published jointly by them and us and made publicly available on their website. But that was back in 2012.
“I think things move on, websites change and I think it had gotten lost in the mists of time. So we felt it was appropriate to restart that process.”
“What it does is to outline really why these types of agreements might be appropriate for buying goods and services, but they’re not really appropriate for buying group protection.”