Oft-quoted rule of pension planning: 'Don't delay'

The stagnation of the economy and in particular the struggling plight of SMEs, has led to calls to postpone the introduction of auto-enrolment, most recently in a Government report by Adrian Beecroft.

But the nine million workers who currently contribute nothing towards an occupational pension – and who have no ancillary benefits – cannot afford any delay. Besides, many employers have already made substantial investments to gear up for auto-enrolment.

Auto-enrolment is a huge opportunity to raise the bar for employee benefits by ensuring that the workplace becomes a universal safety net for all employees, regardless of their income. In the longer-term, after the introduction of pensions, I believe employers will make a virtue of the necessity to contribute and offer broader benefits programmes, including life and disability cover.

In turn, auto-enrolment will be the trigger for closer convergence of group risk with pensions and other workplace benefits. Technology will be the key to giving IFAs the platform they need to be able to offer comprehensive benefits to employers in a hassle-free way.

Improved AALs - especially for smaller schemes

We've improved the way we calculate automatic acceptance limits (AALs, also known as ‘free cover limits’) on group life schemes.

The changes minimise the number of members whose benefits require underwriting, with the biggest impact being on small schemes, meaning that the process becomes as hassle-free as possible for them.

The changes to AALs means that Ellipse only underwrites members whose benefits are a long way from the scheme average and will benefit small schemes in particular, reducing the need to underwrite as frequently and making the process easier.

Even where underwriting is required, Ellipse offers its fast, easy, online assessment that allows the whole process to be completed within 20 minutes (as opposed to the usual days, weeks or even months our competitors take) in the majority of cases.

With no minimum premiums, no policy fee, the availability of a Master Trust facility - and now our improved AALs – it adds up to a compelling group life proposition for advisers to take to their SME clients, so if your company hasn't yet signed a Terms of Business Agreement with us yet, please visit http://www.ellipse.co.uk/working-with-us

Communicating direct to the client about their insurance cover

At Ellipse we have purposefully set up our processes and systems so that the right people do the right stuff at the right time and duplication and delays are cut out of the process. That is why important client documents like the policy documents, statements of account and direct debit collection advance notices are delivered automatically and immediately after issuance to the adviser and client in parallel (never to the client only) as a default.

Advisers are asking us to not use this functionality so that they can check all documentation before it is passed on to the client. For obvious reasons, checking is not a high priority on the advisers’ task list and therefore this practice causes delays and service standards that look much worse than they actually are. This reflects badly on both us and the adviser.

It is not unusual for policy documents to be passed on only several months into the contract, when they were originally issued within days of the on risk confirmation. Wouldn’t the client be better off with actually having a policy document at the point of going on risk? Even worse is when direct debit collections from the client’s bank account happen before the client has actually seen the notice that advises of the collection! This then leads to queries from clients as to the basis on which money has been taken out of their account.

Tellingly, very seldom do we actually get a document rejected in this checking process. So what is happening is that all documents are held up from going to the client to cater for the odd one out that might need a change. Process experts call this “designing the process for failure”. Why not allow the documentation to flow through to the client as a standard and then catch the odd one that needs adaptation as an exception? There will never be any communication to the client that you as the adviser will be unaware of, so you will always be fully in the picture about what is happening. Our aim in handling communications direct with the client is solely to save them and their advisers time and hassle – we have no direct sales force lying in wait to poach clients and no intention of inviting business other than through independent advisers.

Nobody really owns the client ....

I don’t regard any brand or service provider owning me. Yet this argument runs constantly in financial services.

Every week in our pink papers, we observe a negative game of ping pong between advisers and insurers. The adviser shouts that an insurer has contacted their client direct and are trying to steal the client. The insurer eventually counters with a statement to say that what they are doing is critical to ensure the fairness in the service of their contractual party. Thus, the mutual paranoia continues.

What is becoming clear though is that advisers probably cannot afford to handle everything once a policy is in force. What we need is a much more mature and transparent process so that the adviser can see everything that the insurer is doing with the client that they have introduced. The challenge for advisers is to properly appraise the processes of insurers, make that a factor in the choice of insurers, allow that routine work to happen insisting that the insurer keeps them informed by copying them in on correspondence. Electronically is better because paper is just too expensive for all parties.

Choose your insurer after appraisal of their process, get out of the way on processes where there is little or no earning potential and figure out a systematic method of sample checking. Perhaps demand service level standards that are published and benchmarked.

So advisers, consider delegating more to your insurers and holding them to account through reviews. Now that would be an interestingly subtle shifting of power in the relationship..........

“Do it right, do it now” or “easy to do business with”?

The other day, one of our best supporting advisers drew a contrast to going on risk with us and one of the established insurers in the group risk market.  We quickly got into a good debate about ‘easy to deal with’ positioning in group risk.  Given that he is an alumnus of a group risk insurer who used that strap line for many years there was a good edge to the debate!

Ellipse have taken a positive and definite decision for our process to be at the other end of the spectrum to the ‘easy to deal with’ insurers.  Now that does appear totally contrarian so I’d better explain myself.

All of the things that we set out in an orderly and logical fashion as needing to go on risk have to be done by every client and their adviser at some point.  Typically, those tasks are often done long after the insurer has assumed risk.  That can feel easy at the time of going on risk but it does mean that all the parties involved have to pick up the file again. 

The further a task is from its natural place in a process, the probability that it is not done increases.  Indeed if it is not done in its natural place the risk that flows from it and the real costs of operation increase too.  Chaser processes are generated and back-logs build up.  We all know how those back-logs can destabilise the insurer, both its cost base and service reputation.  Our approach is to get the job done at the right time and then to reap a productivity dividend for the intermediary, the insurer and of course the client.  The thing just works better from the start. 

If there are gaps in the disclosure as we go on risk then the adviser creates liability for themselves.  Smarter advisory firms are highly sensitive to creating operational risk within their business. 

Overall, switching insurers is not inherently risky unless it is rushed and some sloppiness creeps in as a result. 

I have done the “easy to deal with” positioning in my Swiss Life (UK) days when there was infinite flexibility and an “everything is possible” approach.  There is no doubt that it is a superficially attractive positioning but what became clear was that it brought huge inefficiencies and many unhappy clients in its wake.  It is easy to build up a mass of unfinished tasks, incomplete data and ultimately levels of operational risk which undermine the life office and negatively impact the intermediary’s operations too.  Undoubtedly there were increased costs for adviser firms.  Personally, and professionally, I have resolved not to repeat those patterns in this business.  So we will be striving from a clear philosophical starting point and equipping advisers with systems and processes to enable “ Do it right, do it now” and to get on and make some proper returns.

Time to restructure those group life programmes in hotspots

We could beat around the bush or dance around our handbags (really?) but let’s not.

If you are an adviser to larger corporates, you’ll know the score and have clients who have had single event limits aka ‘Catastrophe Limits’ imposed on your schemes.  You will have split the larger schemes between two, three or four insurers and you might even have bought eye-wateringly expensive catastrophe excess of loss top-ups.  Cat XL is the insider jargon.  

Error Type 1 in advising these clients is assuming that there is no alternative to the capacity limits that your current insurers have provided through the last two or three review cycles.

Error Type 2 would be not asking us to quote at the centre of the restructure.

Outside of what are normally considered ‘hotspots ‘, we can do £300m to £500m event limits at no extra cost.  In the hotspots - City, Canary Wharf, W1, NW1 - you can deepen your clients cover, improve the quality of the insurance counterparty and make major cost savings for the client.  If you can design out the catastrophe excess of loss top-up there are major savings to be made. 

The last-minute word

More feisty stuff from our leader on the practice of allowing the holding insurer the last chance to match on review quotes http://www.ifaonline.co.uk/cover/feature/2086698/-minute-word-risk-renewals.

Do you agree or disagree? Let us know! news@ellipse.co.uk

We're very ple-eee-ased...

Whole team is really chuffed to have picked up a top 'eee' rating in F&TRC’s Group Risk e-Excellence study.   People expect me to bang on about how great our technology is (and I do not disappoint them!) but when other people give it praise it really adds weight.

To some extent, we were on a hiding to nothing – having set out our stall to be a digital insurer it would have looked pretty weak to get anything other than the top rating – but to have achieved it inside two years of starting the company from scratch is still something we’re immensely proud of. 

The opinions we give most attention to, though, are ones that come from users of our systems, i.e. advisers.  We will shortly be re-running a brief survey (online, of course) that we first ran back in February, asking advisers who have registered so far what they think of the online quotes service.  There are a lot more users now, and we have tweaked the system since the first survey (based on the feedback it provided ), so if you get the email we’d be really grateful if you could set aside a couple of minutes to complete it, even if you did so last time.  If clear themes come through as to the improvements respondents want to see, we WILL act on them.

Group risk...holding on tight !

Holding insurer gets to match.  It’s a well engrained habit.  But there is evidence that as a process it is looking as dated as my Dressdown Friday chinos.  You all know the routine.  The holding insurer always gets last go, sometimes with full details of their competitor’s offer.  Irrespective of whether they have done a good job for the adviser and the client and indeed whether they have been giving the client a fair price in the preceding period of cover.

Now we are properly in the market it is interesting to reflect on patterns of trading and behaviour.  We may be seeing the start of a change in this most persistent of habits.  When the market breaks its habit of asking holder insurer to match, will we then see the incumbent insurers having to sharpen up their service and actually invest in their processes ?  If you get to match even when your service has been poor, why will you feel the urge to change ?

My old guvnor Des Le Grys always taught us that before we strode into any business talks  to have a turn round the block in the other man’s shoes.  I do understand the holding insurer’s position and can see that he or she is not having a great time.  When you defend on a price derived from another insurer’s basis you will probably feel that “ there is no money in it “ and it follows that the prevailing feeling is that there is no margin from which to invest.

Advisers, and I include the major employee benefit consultants in this, are increasingly no longer routinely disclosing the best rate to allow the incumbent insurer to match as the last stage. 

Indeed they are saying to the incumbent “You will not go through to the second round automatically as the holding insurer and we expect you to quote on time according to our agreed plan with the client”.   They say that by doing this they are getting all insurers – and particularly the incumbent - to quote aggressively, by reference to their own basis and earlier.  They tell us that as a result of this change in approach  

ü  they have a faster review process,

ü  more control in their own processes,

ü  lower costs,

ü  are able to meet their deadlines with clients and

ü  are able to prepare their reports more reliably and professionally.

Interestingly they feel they are getting better prices from insurers overall too.  Some of the big incumbent insurers are providing strong feedback – sorry to use that exhausted corporate euphemism – on this change.  Perhaps that is understandable but if you price relative to your own basis you might find that your control of your book and analysis of your business gets quite a bit better.    

Profile of our leader in 'Health Insurance'

Modesty prohibits him flagging it himself, but there's no reason why I can't, so check it out here.

Just one thing to clarify: our online quote system can indeed handle quotes with up to 500 members for group life and 300 for GCI, but if you have larger schemes, we are happy to quote for those too if you send them to quotes@ellipse.co.uk

Absence-minded

Interesting story in People Management showing sickness absence fell in 2010 and that there is no single reason for this, more a combination of various factors.  Highlights the need for everyone involved – employer, benefit providers, absence management professionals and GPs – all to be pulling in the same direction.  Particularly encouraging to see that GPs are starting to play an active role in rehabilitation, rather than seeing their responsibilities end once they’ve signed patients off.

No Cap & No Time

Did you see this article covering the end of transitional arrangements relating to the notional cap?

The deadline is the end of April and if a group life insurance policy doesn’t accurately reflect the new scheme benefit basis there’s the potential for large uninsured liabilities...which will probably be laid at an adviser’s door.

Clients need to make active decisions. They can either introduce a scheme cap within the pension scheme rules or make sure the cap is removed from the insurance cover. The key point is for the insurance cover to match the actual risk.

Where they exist, uninsured liabilities will affect senior employees, and it may mean underwriting is required if benefits are above the free cover level, which could take weeks or months to complete – unless your insurer is offering online member underwriting that can be completed in minutes.

Un-sticking stuck schemes

Many schemes have members who have been declined or postponed at some point in the past. This often results in those schemes being stuck with one insurer because others will load up the rates massively or decline to quote at all. The holding insurer can then dictate terms without having to worry about any competition or revisit their decision to decline/postpone (e.g. someone recently diagnosed with cancer would at that point be declined but after 12 months can often be accepted with a loading)

The good news is we can provide a no-risk way of seeing if any ‘stuck’ schemes can be ‘un-stuck’. Our online member underwriting service can be made available to the declined/postponed members – without switching the scheme to us first – to see if we can offer terms. The online assessment takes on average 15 minutes to complete, and decisions are typically immediate.

If the decision is ‘decline’ or ‘postpone’, nothing has been lost (and the initial decision has been validated) but if any terms are offered, the company is no longer stuck with just one insurer.

More details by contacting our Sales team on 0844 338 0493 (or sales@ellipse.co.uk)

P.S. As well as un-sticking any of your own clients, this could be an ‘in’ to new clients in the same predicament!

Ellipse raises money for Comic Relief

Ellipse had its very own Comic Relief day yesterday (a day early, but we pride ourselves on being ahead of the pack). Everyone came to work in their jeans (and tops!) and the best bakers of the bunch made cakes, slices of which were on sale. Rather creatively for an insurance company you could also purchase fairy cakes which you then had to decorate yourself. Needless to say none of them looked that good in the end.....

Our CEO John Ritchie challenged the sportsmen of the company to wear a rival teams shirt. The cost of refusal was to match the value of the money raised to get them in the shirt! (You try getting a Scotsman into an England shirt and see how much he is willing to pay not to do it!)

In total £241.31 was raised for Comic Relief.

Hello, good evening and welcome...to the possibility of compulsory income protection

First time I've seen anyone outside the industry suggesting incentives should be given for employers who provide IP.  If it's followed through it puts a big responsibility on providers to get the delivery of IP right.

http://www.dwp.gov.uk/newsroom/press-releases/2011/feb-2011/dwp022-11.shtml

http://www.ifaonline.co.uk/cover/news/2034148/incentives-address-poor-employee-protection

Armageddon the feeling we've been here before...

So, as widely anticipated, the ECJ have ruled that insurance premium rates must be the same for men and women.  It's the end of insurance as we know it. 

Well boo-hoo.  It might be a daft decision, but I suspect anyone old enough to remember the removal of LAPR and MIRAS will feel disinclined to waste their energy in wailing or teeth-gnashing.  There have always been 'bombshells' and the industry has always - and will again - evolve and adapt.

Cheers for the feedback...especially the criticism!

In week 2 in February we surveyed all advisers using our on line group life and CI quotes process to get some further feedback on ease of use and competitiveness. 75% of respondents indicated that we are competitive. 61% gave Strongly Positive responses on competitiveness, 8, 9 or 10 on a ten point scale.  On ease of use, 83% were Positive, 50% Strongly Positive.   

We have acted on early feedback and are now changing some screens particularly on data upload processes.   Thanks for the feedback.  

Smooth the flow

For finance managers with a December year-end, January can be a long and busy month. As well as keeping stakeholders informed on performance, putting together the accounts and preparing for audits, we hopefully have a realistic budget in place for the coming year.

During these uncertain economic times the need to control costs and cash is forefront in the minds of all managers, not just the finance professional.

Costs such as office service charges, healthcare costs and group risk insurance premiums can be difficult to manage as it’s often the case that actual costs for the year are not known until the end of the billing period, when an under or over charge is calculated.

Ellipse’s processes ensure our client billing reflects the cover in a more dynamic way. Our clients can choose to provide us with updated employee data, monthly, quarterly or annually. By opting for more frequent updates the client advises us of salary changes, leavers and joiners when they occur rather than at the end of year, meaning they pay for the cover they have as close as possible to the period they have it.

When a lot of companies are downsizing and making changes to their workforce, the chance to have this reduced cost reflected in insurance premiums earlier rather than later is a definite plus. If your scheme is ’unit rated’ and your workforce has got younger and smaller in the rate guarantee period you will be paying too much – sometimes quite a bit too much.
It seems a bit counterintuitive to say that providing data quarterly will mean less work. But providing data close to the point where it is current is easy; providing it at a date in the past is always a chore.

All this begs the question, why run your budget and forecast your cash flow blindfolded when you no longer have to?

How did you celebrate the DRA exemption?

Probably without the panache of these lads from FC Stjarnan,  

but whether you just breathed a sigh of relief or threw an all-night party it’s certainly a positive start to 2011 for all of us in the group risk market.  The nightmare scenario of businesses, faced with huge liabilities, scrapping their group benefits altogether has been averted.

The Government’s decision should ensure that employers continue to make group risk benefits an integral part of employees’ welfare packages. With the prospect of the long-term dilution of state benefits, it’s all the more important that the Government encourages businesses to pick up the slack, and avoids regulation which will discourage group benefits provision in the workplace.

Collective thanks are due to the Regs team at GRiD for taking the case for the exemption to Government so effectively.

Analysis – Aussie style

Tidying up my notes from a November conference in Sydney and pining for their coastal golf courses – they may be having horrible weather in Queensland but it’s still summer down there – I found a note I made of an exchange between two advisers.  (Yes, they sledge at life insurance seminars too.)

When the speaker was challenged on his aggressive advocacy of straight-through processing and automated underwriting, he came straight back with “Look, why let an insurer’s poor process cost you money ?”

As we emerge from the Christmas/New Year hibernation into a new business year where adviser productivity will remain a big issue, have a think about what you and your support staff do in your processes.  Questioning whether activities are just habits that are a by-product of the way this business is usually done and looking at where you can trim elapsed time and squeeze operational risk out of your business too may be a good way to start the year.               

If you do what you always did, you’ll get what you always got.  Wise words, mate.

PS This is the bit where I want you to watch our video to see whether our approach might be a help.