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Do your employees feel appreciated and protected in these uncertain times?

23 February 2021 Momentum Corporate

Changes to the Policy Protection Rules are here to help

In a bid to win the war for talent, retain valuable skills and protect their employees from the financial impact of certain life events, many companies provide group insurance benefits for their employees. Sadly employees are often disconnected from these benefits, unaware and unappreciative of the real value they offer. However changes to the Policy Protection Rules (PPR) are set to change this.

Rudi van Rooyen, Head of Group Insurance at Momentum Corporate, says, “Unfortunately many employees do not fully understand or appreciate the insurance benefits they have through their employer; although the current pandemic is certainly reminding all of us how important it is to have financial certainty in the event of the unexpected, like disability, critical illness or death.”

There are good reasons employees’ relationship with group insurance benefits tends to be at an arm’s-length. Van Rooyen explains, “Firstly, decisions around the provision of group benefits lie with the employer rather than individual employees. Furthermore, communication around group benefits is often inadequate and cluttered with confusing language and industry jargon. Finally, it’s human nature to shy away from thinking about how unpredictable and uncontrollable life can be.”

“However, inadequate knowledge and poor engagement around their group benefits often means employees miss out on important benefits when their family need them most. It can also lead to under- or over-insurance. And, where an insurer includes value-added benefits in their value proposition, low awareness may mean missing out on this additional value,” says van Rooyen.

Fortunately, changes to the Policyholder Protection Rules (PPRs) under the Long-term Insurance Act will help employees get a lot closer to their group insurance benefits.

Van Rooyen explains, “Treating members of group insurance schemes or retirement funds more fairly is at the heart of these rule changes. A key change is that the definition of a policyholder in a group insurance scheme has been extended from just the employer or retirement fund to all individual members. This means the law now requires insurers of group policies to communicate directly with members, providing specific and appropriate information about their benefits and the policy.”

“Direct communication from insurer to member should help members to become more familiar with their benefits and the conditions under which they are paid. Members who are part of a group insurance scheme or retirement fund that provides flexibility in choosing insurance benefit levels will also realise that they are able to increase or reduce their benefit levels based on their personal situation. This should lower levels of over- and under-insurance and will better meet the specific needs of each member,” says van Rooyen, who adds that the communication should also increase awareness levels of value-added benefits, where available.

The law also says that the communication used by the insurer to explain benefits, features and conditions for payment must be in plain language, through an appropriate medium and should not be misleading.

Van Rooyen says, “We welcome this requirement as our research shows that, in general, members have a basic level of financial literacy and there is a discomfort around industry terminology, regardless of age or income. One of our strategic imperatives at Momentum Corporate is to demystify complexity and engage with members through easy-to-understand communication which educates and empowers informed decision-making, thereby improving financial outcomes.”

In order to communicate with employees, the insurer providing the group benefits needs to have up-to-date contact information about insured employees. At the very least, they need names, identity numbers and contact information, such as a mobile number or email address.

Van Rooyen appeals to employers, financial advisers and retirement funds to work in partnership with group insurers in making sure the insurer has up-to-date contact information for members.

There is another change to the Insurance Act which adds to the need for up-to-date member information. All death benefits paid from unapproved group insurance policies must now be paid directly to beneficiaries, and can no longer be paid to the employer.

Van Rooyen explains, “This means that it’s vital that insurers not only have up-to-date contact information for each member but that employers make sure that they have up-to-date beneficiary nomination forms in place for each member, which the insurer can consult when paying a death benefit directly to nominated beneficiaries should an employee pass away.”

In closing, van Rooyen says, “Employees with inadequate knowledge about their group insurance benefits may feel anxious and concerned, particularly in the midst of a pandemic. Collaboration between insurer, employer, retirement fund and financial adviser to communicate around these benefits more effectively will certainly ease these anxieties.”

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[a] Bring it on; my client’s make too many irrational financial decisions
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[d] The perfect risk profiling tool is science fiction
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