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Brexit, Borders, and Group Insurance

Much has been made of borders in the speculation around Brexit. While focus has been on the Irish border, there is a generalised desire to limit the imposition of so-called “hard” borders after the UK leaves the European Union. These discussions focus on trade barriers, and what remains very much in the air is how people movement will be affected. While limiting free movement is in essence a political problem, it does have very practical repercussions.

Much has been made of borders in the speculation around Brexit. While focus has been on the Irish border, there is a generalised desire to limit the imposition of so-called “hard” borders after the UK leaves the European Union. These discussions focus on trade barriers, and what remains very much in the air is how people movement will be affected. While limiting free movement is in essence a political problem, it does have very practical repercussions.

For those with Group Insurance, there are two populations that employers need to worry about: those on secondment, and those moved into other overseas organisations or territories. For the broader skills and labour challenges ahead, Group Insurance can be a valuable tool in the war for talent − which will only intensify after the UK exits the EU.

The Good News
Firstly, the good news: secondees, where they fulfil the definition, can continue to have their group risk benefits sourced from the UK. There are extra PAYE reporting responsibilities for employers, though.[1]

‘Secondment’ is when an employee, or group of employees, is temporarily assigned to work for another ‘host’ organisation, or a different part of their own organisation. On expiry of the secondment term, the employee (the ‘secondee’) will return to their original employer. Short-term secondment varies from employer to employer and country to country. It may be less than six months but, more typically, is a secondment of between two and five years. The point is that there should be an expectation from the outset that the stay in the host location will be temporary, and that generally the home country employer remains the legal employer.[2]

This is not to say that secondment is an easy option for UK employers as not only do they have additional reporting around PAYE, but they also need to consider a raft of other logistical issues such as relocation allowances and expenses, schooling, international Private Medical Insurance (iPMI), host country tax laws, and so on.

Employers will need to have a secondment agreement in place, which will set out the legal liabilities of each party as well as the practical arrangements for the secondment. The agreement can be tri-partite (secondee, employer, and host organisation), or an agreement between the employer and the host organisation. While Group Income Protection benefits can be paid in specific territories (those with advanced healthcare systems and where medical evidence can be gained), organisations need to think through their approach to sickness. Sometimes, repatriation of an employee and their family will be seen as the best option for them.[3] Summarising, aside from these additional, sometimes significant employer obligations, UK Group Insurance insurers can continue to provide full risk benefits for those on secondment.

And the bad…
And then the bad news: how many secondments will actually take place, rather than simply moving employees abroad? Will an amount of people leaving the UK permanently reduce the insured UK population? This has yet to be forecast, but estimates of 35,000 – 75,000 City jobs would not materially affect the numbers of employees covered; though it is becoming increasingly evident that more people, both from the EU and UK, are leaving the country.[4] If well paid roles go overseas permanently, reduced benefit amounts (and, in turn, premiums) would be a possible outcome and could be a concern for UK insurers.[5] Many would argue that with likely skills shortages, the importance of retention and attraction of staff would increase the importance of benefits market growth.

For those who become full time employees in the new country, they and their employers can broadly enjoy the same benefits packages, depending on where they are, through multinational pooling. Multinational pooling provides in-country benefits with each country providing input into the overall scheme set up by a parent.

There are only 3,000 multinational pools worldwide[6] but there are 100,000 multinational organisations.[7] This risk-free area of group insurance remains significantly underpenetrated. In the UK there are 25,000 worldwide or EMEA headquarters and so the ability to discuss new pools has never been greater.[8] Should the UK parent establish a multinational pool to continue to have risk oversight, benefits continuity, global health and wellbeing programmes, potential dividends from well-performing non-UK territories? Pooling needs to be evaluated in the new post Brexit world and corporate advisers are brilliantly placed to do this.

There could also be potential for UK market growth. Where an EU parent company has a UK subsidiary, they can invite them into their pool to make sure that in-country UK benefits are established or maintained. EU employers could introduce their benefit profiles to new UK workforces and use pooling for all the advantages that it brings.

Retention and benefits are identified by Mercer as key business priorities for the post-Brexit labour market. Attraction and retention fall under their “first line of defence,” while the range of support available from mature Group Insurance propositions can help businesses provide for a diverse workforce, which is Mercer’s “second line of defence.”[9] It is difficult to understate the challenges facing UK employers in the coming years. Not only will there be a shallower pool of talent to draw people from, but skills will also be lost due to an ageing workforce. Attracting the best talent, and keeping hold of what is present, will require new thinking.

Mercer presented a range of migration scenarios in their Workforce Monitor, but in less than a year data emerged to show migration was falling faster than in any of their projections – even the “Great EU Re-Migration,” which projected a workforce actually declining by 700,000 by 2030; this was the most extreme scenario which seemed feasible in January 2017, and by August of that year the data showed workers were already leaving the UK at a faster rate than even that. It is a stark warning that action is needed to protect the workforce in the short-term and have plans in place to maintain at least parity in the coming decades.

At the national level, UK employees are under-protected. The combined threats of labour and skills shortages could be what lifts the veil from employers’ eyes to the value of Group Insurance to them and their workforce, both present and future. Broadening the benefit offering is a simple and cost-effective way to enhance appeal as an employer.

Group Income Protection (GIP), in particular, should be investigated for the dual purpose it can serve. It provides a far more secure safety net than the current UK State benefit system, which will demonstrate you view employees as an investment and a valuable part of your organisation who will be taken care of. Most GIP schemes in the UK also come with a comprehensive suite of support services which can be used every day by people at any stage of their working lives.

For example, an Employee Assistance Programme (EAP) could have a whole host of health and wellbeing features such as budgeting tools and healthy eating plans, keeping workers engaged and productive. Counselling can also be accessed at their convenience for any issues which may be causing stress or anxiety – it has been well established that access to this service can reduce and even prevent absence.

Similarly, second medical opinion services can give employees access to leading medical experts and even GPs. At a time when health and social care in the UK is under enormous pressure – and only be exacerbated by post-Brexit labour pressures − this benefit can be a real eye-catcher and, given there are only 18,000 or so GIP policies in the UK at the moment, one which could really help differentiate an employer from their competition.

There are threats and opportunities for UK Group Insurance in the post-Brexit era. As an industry, international cover is one where existing solutions are ready for employers to take advantage of. By being easy to do business with for people on secondment and providing pooled solutions to deliver global benefit programmes, all but the hardest Brexit can be readily prepared for.

The real question is whether employers are ready for the “emerging UK workforce crisis.” The social and professional dynamic will change drastically in the next ten years and businesses will not be able to rely on the same old recruitment strategies. Time and time again, history has shown that companies which are able to respond and adapt to the changing landscape are those which thrive and leave their competition shuttered on the high streets. New thinking will be required; many businesses will need to put their money where their mouth is and invest time and money in understanding and meeting their workforce needs − so that employees can, in turn, give back in terms of loyalty and productivity. No industry will be untouched. People and their skills will become a more valuable commodity and those who are agile in their thinking and prepared for the challenges ahead will weather them better than those who remain stuck in outdated habits.




[4] Mercer Workforce Monitor – August 2017 Update, p3


[6] Insurope report of UNTCAD and Dun & Bradstreet figures

[7] Insurope report of UNTCAD and Dun & Bradstreet figures

[8] Insurope report of UNTCAD and Dun & Bradstreet figures

[9] Mercer Workforce Monitor, p14

Paul Avis, Marketing Director, Canada Life Group Insurance

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