The majority of small businesses understand the importance of taking
out insurance against fire, theft or floods but not so many consider
insuring the health of their personnel. But this ’wing-it‘ attitude is
changing as employers across the board become more aware of the role
that good health and a decent work/life balance can have on company
productivity and more employees request health benefits.
The vagaries of NHS waiting lists is another prompt for some employers
to buy policies that entitle staff to private treatment, particularly
if they have had a brush with a debilitating illness. “I had a client
who couldn‘t work because he needed standard surgery but couldn‘t get
near an operating table for 12 weeks,” recalls Tim Schofield, a
financial consultant with Alexander Forbes Financial Services.
Denis Palmer, senior client service manager for London Business Link,
remains sceptical about the role of health insurance, however. “It‘s
very rare for micro-businesses to take it out as it‘s a prohibitively
expensive measure for an intangible risk,” he says. Interestingly, Dave
Priestly, sales director of PruHealth, a division of the Prudential,
echoes this sentiment. “PMI is a fairly expensive benefit to provide
and you have to be pretty sure of your cost justification,” he says.
But the two propose very different remedies for unexpected, long-term
sickness absence. Palmer points out that if serious illness does
strike, companies can find themselves in a similar position to covering
a period of maternity leave: it‘s a question of the rest of the staff
pulling together and calling on outside help when necessary.
Certainly successful small firms are highly resourceful and this
remains a likely contingency for a majority of micro-businesses. For example, Gill Gledhill, proprietor of fashion marketing agency GGHQ, needed a
medical procedure that required a gradual rehabilitation but found she wasn't covered by her existing policies.
“I had
critical sickness cover but that only covered scenarios like losing a
limb. I also had private medical health insurance but it didn‘t cover
this particular procedure,” she explains. Gledhill eventually had the operation on
the NHS and her husband, who works in the same field, oversaw the running of the
business while she recuperated.
PruHealth‘s Priestly argues that companies which buy health insurance
should look at the bigger picture. “Traditional PMI is out of date
because it focuses on recovery from ill-health rather than promoting
wellness in the workforce,” he claims. On top of the traditional
element of provision of private, secondary medical care, PruHealth
offers ’wellness‘ benefits including discounted gym membership, entry
to health spas and health screening.
’Small businesses want to be seen to be as caring employers and to be competitive and to attract the right employees. The right kind of employee would consider private medical insurance to be a standard part of a package‘
Standard fare
Intriguingly, companies that provide PMI for their staff don‘t always
expect the investment to safeguard their business. Instead, the
motivation for offering private medical care is shifting from the
rehabilitation of staff to enhancing employer branding, believes the
Federation of Small Businesses. “Big businesses all offer it so smaller
firms are finding they need it too if they want to be able to compete
for the best staff,” a spokesperson explains.
Prudential research
confirms growing demand for these benefits: two-thirds of employees
expect their company to provide health support and 76% say they feel
more valued if it‘s offered. Alexander Forbes‘s Schofield believes
employers view PMI as an increasingly useful tool in the war for
talent. “Small businesses also want to be seen to be as caring
employers and to be competitive and to attract the right employees,” he
says. “The right kind of employee would consider PMI to be a standard
part of a package.”
Schofield advises businesses to take the time to be clear about
their objectives before parting with their money. For example, with
very small businesses where the health of a few staff is vital, he
suggests that income protection – where the company is able to claim
back a percentage of an employee‘s salary should they be off sick for a
certain period of time – is often a better means of insuring the
business than PMI. This frees up funds to enable the business to buy in
temporary cover and means sick employees are more likely to return to
work once they have recovered.
“Small companies
that are just starting out want to protect the business and income
protection is a better way for them to do this,” he states. “While PMI
is much more heavily advertised and advocated by providers, from the
business perspective, income protection is probably the key.”
A
big issue is deciding at which point the benefit should commence,
explains Schofield. The earlier a policy kicks in, the higher the
premium. The majority of business owners who opt for this type of
insurance prefer to hedge their bets and assume they can survive the
first eight weeks paying employees full-pay themselves and scrimp
through the following eight on half-pay.
Star performers
Key person cover – where a company insures against losses that arise
directly from the absence of a vital employee such as a sales director
– is another, more targeted way of mitigating illness risk and is one
that worked for laundry firm Cornish Linen Service Group. In 2003, the
company‘s joint managing director Alex Rowe suffered a stroke which
kept him away from work for six months. But a key-man insurance policy
ensured the business received a lump sum of £250,000 which tied it over
during his prolonged absence.
“In my absence the
business was unable to secure many new business deals,” recalls Rowe,
who claims the lump sum of £250,000 helped maintain the firm‘s
profitability as well as covering the costs incurred in providing
temporary staff. “We had looked at ways of ensuring other staff members
would be able to cover our roles in the event of unforeseen absences,”
he adds. “But the problem is most operations manuals are difficult to
write, harder to understand and rarely kept up-to-date.”
For those opting to take any insurance route, understanding what makes
your workforce ill will help you buy the best product, recommends Ben
Wilmot, policy adviser at the Chartered Institute of Personnel and
Development (CIPD). The organisation‘s research shows that whereas back
pain is the leading cause of long-term absence for manual workers,
stress is the undoing of many office-based employees.
In countering stress, Business Link‘s Palmer rates investment in an
employee health helpline as more useful for small businesses than heavy
duty and expensive PMI policies. “Independent and specialist health
advisors are able to pick up on things that managers can‘t see – let
alone counsel on – such as stress and alcohol and drug misuse,” he
explains. “It‘s a very helpful way to manage problems and can offer an
intervention before they spiral out of control. Medium-sized companies
can also receive reports about any high incidences. It‘s an early
warning that a situation might need to be managed.”
Finally, Priestly recommends companies solicit the advice of a broker
to guide them through the insurance minefield. Many products on the
market were developed for large corporations and ’re-badged‘ for
smaller firms but these businesses need a product that is “simple and
low on administration”. Paradoxically, points out Priestly, while small
businesses can spare the least time to develop a thorough understanding
of benefits, they are also more likely to buy direct. Taking the time
to understand the business needs and the type of insurance available
could prove critical should ill-health come knocking.