The current economic downturn is having an inevitably deflationary impact on employers’ benefits budgets. And as the state continues to shift responsibility for healthcare provision onto businesses, who in turn must be tempted to shift it onto employees, is the voluntary benefits market set up to cope? Edmund Tirbutt investigates
Voluntary group benefits, which are paid for by the employee at a discount to rates available in the individual market, should in theory be set to enjoy a purple patch. The state is trying to shift responsibility for healthcare provision onto employers, who in turn must be tempted to shift it onto employees – especially as corporate budgets are becoming increasingly tight in the wake of the credit crunch.
In practice, however, there seems little evidence that this theory is yet being translated into practice. Most insurers and specialist intermediaries report a steady increase in demand for products sold within flex schemes but observe that demand for voluntary schemes held outside flex is only a notch above static – coming primarily from affinity groups, smaller businesses which cannot afford conventional benefits packages and larger companies which only offer company-paid cover to certain grades of staff.
Mike Izzard, managing director of national specialist intermediary Premier Choice Group, is a notable exception. He says: “There is definitely evidence of employers beginning to export the cost and responsibility of employee benefits to employees. It started a year ago with the onset of the credit crunch and is only likely to accelerate. Intermediaries need to find new revenue streams and this would seem to be an obvious opportunity.
“Any intermediary not following up opportunities to do group affinity schemes is therefore missing a trick. They should be going through client bases and looking for trade organisations, public bodies and professional associations, and if they haven’t got any they should start searching online and contact them.”
Nevertheless, even those who do not yet feel justified in issuing such invitations to rally the troops tend to agree with the theoretical “reasons why” and to predict that voluntary benefits will start to enjoy significant momentum in the foreseeable future.
Andrew Woolnough, flexible benefits distribution manager at national employee benefits consultants Jelf Group, says: “There is not really any evidence yet of increased demand for voluntary benefits outside flex but there is a trend both to offer voluntary top-ups to existing employer-paid benefits and to be smart in how you communicate the benefits you offer. I do definitely see a trend towards voluntary benefits happening and these other trends will lead towards it. The one thing that voluntary benefits are really good at is offering something for everyone.”
Some commentators express the view that voluntary benefits will have really come into their own in 10 years’ time but none attempt to quantify the exact extent of any increase. This is perhaps understandable in the light of a distinct lack of current data about the size of the voluntary benefits market, a situation caused primarily by difficulties in comparing like with like.
Some definitions of voluntary benefits refer only to those paid for by pay-roll deduction, while others include benefits paid for by direct debit, and some include benefits that are only partly paid for by the employee while others do not. In the few cases where insurer spokespeople volunteer any figures they tend to be unclear as to exactly what these refer to and they are also normally unable to make statistical distinctions between standalone voluntary benefit schemes and those that operate within flex.