Employee Benefits – Enhanced Products For Smaller Companies

Group risk is an umbrella term for sponsored employee benefits and includes products such as group life insurance, group income protection and critical illness cover.

The benefits of group risk can be valuable to employees as they provide financial protection for both them and their families, yet they are relatively inexpensive for employers compared with some other components of the typical benefits package. The main features of each type of group risk benefit are as follows:

• Group life cover is the most common employer sponsored benefit in the UK and is believed to often represent the sole life insurance provision for low to middle income individuals.
• Group income protection enables an employer to provide a continuing income for employees if illness or injury prevents them from working for a prolonged period of time.
• Group critical illness cover pays a tax-free lump sum to an employee on the diagnosis of one of a defined list of serious conditions or on undergoing one of a defined list of surgical procedures.

These group products can often be provided by an employer at a considerably lower cost than plans arranged on an individual basis. Enrolling employees into such schemes is generally easy as group schemes often allow members to join, up to a given level of benefit, without having to provide any medical information. This given level of benefit, often referred to as "free cover limit", is affected by a number of factors, including the number of employees joining the scheme

Issues for smaller companies

For larger companies, the economies of scale bring the benefit of competitive premiums and higher free cover levels, such that most employees can be covered without having to provide medical information. However, smaller employers may find that the "free cover limit" is low such that some employees may be asked to provide full medical information. Staff with an adverse medical history may find that this has an impact on their application for these group risk benefits.

Apart from the medical issues, smaller companies may find that they are unable to access favourable terms and conditions and policy features that are granted to larger companies and the cost of the schemes may be higher than those paid by larger employers when compared on a per employee basis.

Our solution

Smith & Williamson Employee Benefit Consultants has secured an arrangement with a leading group risk insurer to provide smaller employers with access to a range of group risk product terms, policy features and service levels that we believe provide terms that may not normally be available to them. This arrangement is available to firms with between 1 and 100 employees.

The benefits

What is offered under this arrangement to eligible employers:

• Guaranteed minimum free cover level of £500,000 benefit for group life assurance and £60,000 benefit for group income protection scheme for each employee.
• Cover available within all UK postcodes.
• Three-year premium rate guarantees at no additional cost.
• Cover can be extended to age 75.
• Automatic cover up to the free cover level with previous adverse underwriting ignored (medical loadings or restrictions removed).
• Once a member is successfully underwritten on group life and group income protection schemes he/she will not be asked to provide further evidence in future years.
• Free employee assistance programme, supplied by Ceridian, for all schemes.
• Early intervention and rehabilitation service through a nationwide network of vocational rehabilitation consultants plus access to rehabilitation support telephone line for employers.
• Dedicated administration and underwriting contacts. Through this small schemes arrangement we want to provide access to a broad, flexible and affordable range of complementary protection solutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.