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Niche Commercial: Group Personal Accident
Improving your aim
Group personal accident has always been undersold. Edward Murray finds that insurers are targeting growth in the small to medium-sized enterprise market.
Some insurance policies are freely bought while others have to be actively sold - group personal accident falls into the latter camp. While there is a demand from some quarters for GPA, turning it into a mass market proposition has proved difficult for insurers, although many believe there is real potential for growth, especially in the small to medium-sized enterprise sector.
GPA aims to provide cover for the financial loss incurred when the employee of a firm suffers an accident resulting in injury or death and can provide cover for employee sickness. It can also be put in place to protect on a 24 hour basis, is not restricted to accidents that take place in the workplace - or even in work hours - and is often used to provide cover for employees travelling abroad.
When looking at the possibilities for growth in the market, it is important to first look at some of the reasons that GAO is undersold. One of the main problems for insurers trying to sell the cover is that it is deemed a luxury item.
Paul Murphy, underwriting manager for casualty specialist classes at Norwich Union, states: "I certainly think from the market analysis we have seen and from talking in the market that is well agreed this product is an undersold and underestimated area. What seems to happen is that there is a fairly good take-up of this type of business in specialist and niche areas. Where we do not see the cover being as well sold or take up is in the SME market.
"Furthermore, GPA appears to be seen as a luxury cover, so people think it is an additional cost for them but a benefit for staff."
Although insurers are targeting the SME market, it is not going to be an easy sell. Andrew Holman, chief executive of Lloyd's broker Holman's, comments: "We tend to sell GPA to clients who know that they want it. SMEs do not have the human resource departments or means to look at employee benefits or business continuity, and it is usually the owner or manager looking after this in addition to their other responsibilities."
He adds that this lack of extensive resources can also mean companies do not devote time to developing business recovery plans. "GPA is both a new product and you have to ask yourself why penetration is not higher. I think it is because clients do not believe they need it and would rather save the premium for five or six years and then pay out from the company cash flow if something happens." In Mr Holman's opinion, the monetary factor for firms is often not as important as the aggravation and hassle factor involved in replacing a member of staff for a number of months. He adds: "No insurance policy can take away that aggravation."
Product overlap
GPA competes in a busy market space and product overlap comes from many directions.
Accident, sickness and unemployment policies, private medical healthcare and
term assurance all touch on situations that could also be covered by GPA,
while mandatory employees' liability also operates in a similar space. Insurers,
however, are quick to highlight the differences between GPA and these other
products, particularly EL. (See below).
Many firms feel that GPA is an insurance payable to the employee, with the employer picking up the premium. For many it is seen as an extra expense that does not strengthen or provide security to the firm in any way. This is not true, according to Mike Smith, head of sales and marketing at insurer Link.
He says: "The benefit does not necessarily have to go to the staff. It is about when a person has an accident, how much is it going to cost to replace them? The costs involved can be very high. The use of the money should go to the employer and then it is up to them to decide what use it should be put to."
Mr Smith believes firms have to move away from seeing GPA as an employee benefit, and instead view it as a tool in the fight against business interruption. "One of the things that we talk about is 'employers interruption' - getting people to think about it in the same way as business interruption," he says.
"People buy property insurance despite it not being mandatory. This is because there is a physical thing that they see will be at risk if the place burns down. They understand that BI costs will be incurred. Companies have not had the idea sold to them that key people can make as much difference to their bottom-line profit as losing a wing of their building - and so they do not cover it the same way."
Tackling misconceptions
Insurers have much to do if they wish to make GPA a volume product in the
SME market. The product is not new to the market, and those taking it up have
already recognised its use to their organisation, whether it be on the side
of employee benefit or not. For others, there is the question of necessity
to overcome, before insurers and brokers can even begin to tackle the misconceptions
and overlaps there may be with other products. Nonetheless, insurers are keen
to push forward into this market and have dedicated plans in place.
Commenting on Norwich Union's plans Mr Murphy says: "We have appointed 12 regional GPA specialists. This role is in addition to their current roles but we are looking for them to take ownership of GPA within their regions with the idea being that they work closely with their local and supporting brokers to dispel some of the myths."
Link also has plans afoot and Mr Smith says: "We have recruited the services of HSBC on its intermediary marketing division side. What we have got it doing is going round and drumming up business - aiming initially at the provincial commercial brokers. Firstly, we are asking it to look at its own business, such as partnership protection, and to think about what would happen if one of its executives or directors went and how that would affect the business.
"We are trying to get it to start thinking about this in a slightly different light and then to start highlighting prospects that we can work on together. We have produced some literature and also printed a newsletter explaining how the product works and with some good success to date. We are also looking to do seminars around the country to explain this further."
Rising pressure
Elsewhere in the market, Groupama is preparing to push its GPA business as
well. "We are conducting a review of the types of firms we would like
to sign up and there are certain areas where the risk is too high," explains
Alistair Sclaire, head of healthcare at Groupama.
"There are other areas, however, where the risk is more attractive. Our approach initially will be to try and identify those industries where we actually feel the need is greater. In schools there is a demand for this type of product because they have a need to replace teachers with a supply teacher should they lose somebody for a short or long period of time. So that is a good example of where the product can be of value to the employer."
He continues: "There is every likelihood that a considerable number of businesses will be suffering difficulties that could be resolved by this product but they are resolving them in a slightly different way. So what we have to go and do is make them realise that there is another way of dealing with these difficulties."
Most businesses, he says, try and muddle through but are coming under increasing pressure from staffing levels. The pressure has steadily risen as businesses have become more efficient with staffing. "If someone takes a holiday then, yes, people muck in but how often does the sickness occur when the person is already on holiday and you are already mucking in?" asks Mr Sclaire. "There comes a point when you cannot muck in any more."
Increased penetration
Royal and Sun Alliance is also developing its offering and is set to launch
a new policy to the market. Robin Ferguson, UK personal accident manager for
RSA, says: "We are producing a new wording for the beginning of May with
a launch to the London and UK markets. Some of the changes will just be enhancements
and cover wordings. There are an improved number of exclusions in the wording,
meaning we are down to very few.
"We are also looking at some of the areas of unrest around the world. This will give wider cover for people who travel abroad to these areas of unrest. Some insurers, for example, exclude people who travel to Iraq, Afghanistan, Chechnya and Somalia but we will not be excluding these areas." At a regional level Mr Ferguson says RSA is trying to push GPA up the list of priorities and expects this to help sales, coupled with the enhancements to the product.
There is no question that work is being done by insurers to push GPA into the mass market and to try and increase penetration but it remains to be seen whether they will be successful.
Brian Kerry, business director Midlands corporate at Towry Law, says: "We sell quite a lot and do not find any particular difficulty in doing so - it is now made simple by the big insurers. GPA is also quite a big commission earner and if you have a decent-sized scheme you could be getting up to 30%.
So if insurers have made it this easy to sell, and the commission levels are high, then it is hard to imagine why brokers have not already pushed the possibilities of GPA across their clients' desks. If customers fail to bite following the current concerted push by insurers, perhaps deeper questions will need to be asked.
Differences between employers' liability and group personal accident
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Employers' liability |
Group personal accident |
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NOTE: An incident at work
can lead to a claim under both
covers.
Source:
Norwich Union
Post Magazine 21st April 2005
