Looking beyond what is typical
EMPLOYEES need advice and assistance in many areas that may fall outside of what is typically thought of as an ‘employee benefit’. Progressive employers are increasingly coming to realise that a holistic benefits programme that is structured to address employees’ exact needs, delivers a significant return on investment.
That return is difficult to quantify, but the latest (2013) Alexander Forbes Benefits Barometer puts it in a range from R4.50 to R23 for each rand invested.
A low rate of absenteeism is the best indicator of the value of such a programme, says Lydia Ritchie, Account Executive of insurance brokerage and risk advisors, Aon South Africa.
“The workplace is diverse and needs a customised benefits solution that addresses the unique needs of all employees. The bottom line is that a satisfied, financially secure member of staff with sound insurance in place as part of that benefit solution is a productive member of staff,” she says.
For instance, with barely one in three cars on South Africa’s roads currently insured, being involved in an accident is a big worry for individuals, as motor insurance is not a typical employee benefit.
“Through a relationship with employers we are offering motor and household insurance cover to employees, tailored to their exact needs and at a preferential rate. Aon is South Africa’s leading broker and we therefore have access on behalf of clients to both our inhouse suite of products and insurer shelf products. The benefit to employees is that they benefit from appropriate insurance solutions at the right price,” says Ritchie. She reports a high take-up of short-term cover as an adjunct to employee benefit programmes, noting that the biggest need is for education. “We can certainly get preferential products and pricing, but most individuals are primarily in need of education. Research suggests that the claims experience for many policyholders is an unpleasant one – usually because they have not had the right advice when accepting the policy. Therefore, a large part of our activity is educating our policyholders so that their claims experience is a positive one,” she adds.
Reinforcing this view in the context of broader employee benefits, Nigel Willmott, Executive Head: Institutional Consulting at Consolidated, says his firm is focused on the need for communication and education of employees. “This is where the need lies – employee benefits are not a commodity but a process.
“One of the biggest challenges in offering staff employee benefits, particularly a retirement plan, is that the benefits and tax implications are poorly communicated to employees. This can create a great deal of angst among employees and even strike activity – as it is an important part of the individual’s remuneration package,” he adds.
Ritchie describes the sorts of things that go wrong when claiming following poor advice: policyholders may have a higher than expected excess or have failed to undertake the risk mitigation actions that are either required or advised, such as having a tracking device in a car or a home alarm system. “An advanced driver’s training course can also reduce premiums.”
Globally, the trend in motor insurance is to have policies and premiums highly tailored to the risk profile of the individual – hence the far greater number of questions asked today when taking out a policy – and one wrong answer (such as saying your car is securely parked at night when it is not) can prejudice a claim.
Ritchie says that what most individuals want is certainty and peace of mind. “They do not want surprises at the end of a month, so most opt for a lower excess and higher premium which they can budget for.” Another area requiring education is household cover. Ritchie says that many people retain their motor cover because of the obvious risk but cancel household cover, not appreciating that cross-subsidisation means that the latter becomes more affordable.
“With the high incidence of hailstorms and rain damage in recent years, this is another area where policyholders came in for a shock when they realised the extent of the damage and that they had cancelled what was in fact cover at a preferential rate. This all stems from either poor advice or no advice,” says Ritchie.
“It is such shocks that impact productivity at the workplace. We have a programme of interaction with clients via monthly newsletters, a FAQ on our website and workplace events. The benefit to clients is that we share the experiences of other policyholders for their mutual benefit. For instance, in response to our call centre receiving numerous reports from clients who had fallen victim to the car-jamming scam, we posted CCTV footage demonstrating how easy it for criminals loitering in the vicinity to jam a car’s locking mechanism and within seconds loot your car.” Ritchie noted how alertness can easily prevent such incidents: physically double-check that your car is locked, put all valuables in the boot, and don’t assume just because you’re parked in a busy location that that offers any additional protection.
“Undervaluing household assets is another problem, resulting in underinsurance and another potential shock for policyholders when claiming. We offer clients a tool to easily calculate the value and not omit anything.
“In addition, a car accident is a traumatic experience and one in which victims often fail to get all the details of drivers and witnesses. We again have a simple form to be always kept in the cubbyhole which guides the individual through the process.
“Car accidents account for 70 percent of all motor claims and most are minor – averaging just R17 000 per claim. But with modern technology in cars and the worsening exchange rate, this average cost is increasing all the time. No accident can be taken lightly,” she says.
In the absence of the type of ‘tailored solution’ allowing employees peace of mind, as advocated by Ritchie, the Alexander Forbes research raised the danger that what many employers land up with is a hotchpotch of employee benefits that they and their employees do not really understand and, even worse, that their staff sometimes fail to appreciate.
Often, the package of benefits is the outcome of diverse factors such as union/employee negotiations and the products sold by financial advisers, but the result can be counter-productive, Alexander Forbes, the largest administrator of employee benefits in South Africa, has found.
Alexander Forbes says benefits should not be limited to providing a retirement fund, death and disability assurance and a medical scheme subsidy; a properly integrated package of employee benefits should include teaching employees how to manage debt, budget and save.
An over-indebted employee is likely to be less productive than one who budgets and makes sound financial plans. The over-indebted employee is likely to have a high level of absenteeism and suffer from poor health.
The challenges in engaging with employees often stem from a workforce drawn from a population that is deeply indebted and financially struggling. This reality is reflected in the National Credit Regulator's statistics which show that nearly half the workforce is under significant financial stress, while the household sector debt-to-disposable income ratio stands at 72.3 percent.
This often results in employees, after a month’s work, having very little left to spend on food, transport and other necessities.