For companies to offer group health, personal accident and term insurance to employees is standard practice. The company bears the cost and all eligible staff are covered from the day they join. This insurance is spelt out in offer letters and sometimes counted as a part of the total compensation. While it is all to the good, employers need to do more.
They need to think deeply about the risks employees face and how they can mitigate those risks. Before company chiefs panic about the cost involved, let me reassure them that this does not have to be a cost for the company yet can result in a material financial savings for employees.
Also read: How to optimise premium for a personal health insurance when an employer-sponsored plan exists
A one-size-fits-all approach doesn’t always work
Staff have very different risks and insurance requirements and companies cannot pursue a one-size-fits-all approach. Some employees have dependent parents. Some have spouses with sufficient insurance cover. Some are married with children, others are married but without children or are single. Some own cars whereas others use public transport. The way to address these diverse requirements is to offer a bouquet of optional covers that employees select based on their specific needs and pay for themselves, perhaps through the payroll.
A company is well placed to procure insurance on behalf of employees because it can buy in bulk and leverage its current broker or insurer relationships to buy cost-effectively. In most cases, individuals will never be able to purchase the insurance that companies can buy.
There are three kinds of voluntary insurance for companies to consider: (a) group health insurance for parent and the extended family, (b) enhancements to the core group health insurance (c) other insurance, such as motor, personal accident and OPD covers.
Group health insurance for parents is the most sought after, for good reason. Seniors struggle to buy individual insurance due to chronic illnesses. Consequently, the premium loading and decline rates for senior citizen health insurance is high. Also, many seniors find it difficult to coordinate the medical tests needed. Once insurance is bought, claim rejection rates are relatively high because of pre-existing conditions. The group insurance that companies buy for parents addresses these issues. Medical tests are waived off and pre-existing conditions covered immediately.
Also read: How much health insurance do you need?
Insurance for parents
Several companies are keen to offer parental insurance for employees on a voluntary basis. Employees are mostly expected to pay for their parents’ insurance, perhaps with some limited subsidy by the employer. A good parental cover can cost about Rs 25,000 per life per year. This may be similar in terms of price to individual insurance but is far more effective and usable.
To buy parental covers you must work with experienced brokers. There are just a handful of insurers that will issue parental insurance because claims are high. Employees with parents not in good health are most likely to buy these covers. This results in anti-selection. A good intermediary addresses anti-selection by ensuring high enrolment. The intermediary will clearly communicate the value proposition to staff.
The second type of voluntary cover is the flexibility to enhance the core group health insurance offered by the employer. This enhancement may be in the sum assured or in covering immediate family in addition to just the employee. This concept has not been explored enough. Most companies fix the benefits for employees and leave no scope for customisation. They should allow changes in the core cover and charge employees the cost for such changes.
For example, if a company has standard cover of Rs 3 lakh it may allow employees to enhance this to Rs 5 lakh on payment of an additional charge. Or, if just an employee is insured then they could consider adding a spouse and children, at a cost.
Also read: Why the claim experience differs between individual and group health plans
Not just health, but your car and house, too
Finally, most employees need much more insurance than just health cover. They will buy this insurance personally and may not strike the best deals or get the best insurance. A good employer can address this by offering a bouquet of curated insurance to staff on excellent terms.
Consider motor insurance. The employer could pre-negotiate the best discounts and give employees access to a portal where they can easily renew motor insurance, on better terms than they would get individually.
Employers can also set-up group retail products for employees. Examples include personal accident, hospital cash and OPD insurance. In personal accident insurance, the company can negotiate a Rs 15 lakh cover for Rs 500 whereas the employee would pay thrice as much on his/her own. New-age insurance, such as cyber liability cover, can also be sold on such platforms.
The voluntary benefits do not always have to be insurance-based. A good company will encourage employees to undergo annual health checkups. The price advantage here is also material. A full diagnostic panel that costs Rs 5,000 in a large hospital can be done for Rs 1,500 if negotiated by the company. With such a price difference, employees willing to be tested will increase.
Companies need to look at employee risks and their insurance requirements comprehensively. Some covers such as employee health and term insurance are essential. But then employees should also have the flexibility to finetune their base insurance and cover other dependents. Good companies will then leverage their product knowledge and negotiating ability to help employees buy other insurance and medical services. This will not cost the company but will result in significant employee welfare and an unmatchable employee proposition. And no doubt lead to better employee retention and loyalty.
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