EB service providers: What does the future hold?

To cope with continuous change in the industry, EB service providers will have to evolve as the economic, social, and perhaps even the political landscapes take on new forms and shapes, altering employer-employee relationships.

The introduction of regulatory reforms has a direct bearing on the Employee Benefit (EB) industry.

Regulatory reforms

On the healthcare front, for example, the National Health Insurance (NHI) scheme may compel employers to look at alternative ways to continue supporting employees to take care of their healthcare needs, if those needs are not met by NHI. This creates an opportunity to develop new products and services to complement those envisaged in the NHI programme. There could also be opportunities for public-private partnerships, such as the administration of the NHI system using existing infrastructure, capability and experience.

Another significant change is the possible introduction of a National Social Security System (NSSS), which could have similar implications for the industry.

The proposed retirement reform model is based on the World Bank model consisting of various pillars or layers. The second layer of this model advocates for mandatory national statutory pension scheme, which will be aimed at the lower income earners.

Depending on the membership criteria, it will most likely cause the movement of between 60 and 80% of members in current active retirement funds to the new statutory pension scheme, resulting in the reduction of the number of service providers. It could also see the consolidation of certain funds, resulting in possible reduction on the cost of pension provision.

Consolidation

As part of the budget review on 23 February 2011, Minister Pravin Gordhan made reference to a recent study by Economic Research Southern Africa which argued that the optimal retirement fund size to achieve economies of scale is around 220 000 members. To realise this, it is proposed in the policy document that small private sector retirement funds be consolidated into a smaller number of large funds, possibly by encouraging or requiring smaller employers to join umbrella funds, and setting a legal threshold on the size of a retirement fund that can be registered.

Alternative products and services

There are other opportunities, such as top-up products and services for individuals who are able to save to more than the levels required by the NSSS, creating opportunities to explore methods of providing alternative products and services. The Economic Development Department recently hosted a conference to explore the use of pension funds to invest in activities that promote development outcomes. Economic development is a key driver for job creation. In turn, jobs allow people to cater for their needs and save for retirement. The more people save for retirement, the better the opportunities for growth of the EB industry.

Integrated offerings

In addition to evolving with reforms, EB service providers may also need to explore integrated offerings. Employee benefits must be designed to cater for the well-being of employees, during and post-employment.

Accordingly, healthcare programmes can go a step further by looking at promoting healthy lifestyles, absenteeism and incapacity management, effective management of workplace clinics, and psychological assistance for employees in distress.

New approaches

EB service providers can influence the extension of insured benefits to cover events and incidents that extend beyond the current reactive approaches (insured death and disability benefits) to those that proactively prevent such incidents.

To survive, EB service providers will have to find ways that will complement growth and development and continue to be productive in the industry. This may require new mindsets, creativity and a heightened focus on social equity and upliftment.