Employee benefits are top of the corporate agenda, and captives may help

It is no secret that the COVID-19 pandemic has forced companies to rethink their relationship with their employees. Since large parts of the world went into lockdown in March 2020, businesses around the world have been forced to find a new way of operating, with many people who formerly worked in an office five days a week learning to do their jobs remotely from home.

What has been less discussed is the impact it has had on the provision of employee benefits (EB) which, while being perhaps less visible, promises to be similarly profound over the longer term.

“COVID-19 has increased the focus on health and wellness,” says Mattieu Rouot, chief executive officer at MAXIS Global Benefits Network (MAXIS GBN).

“Employers recognise they have a duty of care and responsibility towards their employees. They’re thinking about how to keep their employees healthy and about prevention as well as treatment, and providing services that can help with that.”

Among the more visible signs of change in the world of EB has been a great rise in digital healthcare, telemedicine and employee assistance programmes.

“More than 40 multinational clients and prospects have enquired about global solutions this year,” says Rouot. “Previously, wellness was sometimes seen as a ‘nice to have’, now it’s a must-have, and is at the top of the human resources agenda, especially for multinationals.”

Rouot was appointed as chief executive officer of MAXIS GBN in July 2020, taking on the job at a pivotal moment in the EB industry. Although he is relatively new in his current position, he is well versed in the issues businesses are currently facing in this area, having served on MAXIS GBN’s supervisory board since its inception in 2016. In his previous role at AXA, he played a crucial role in setting the group up, as a joint venture between AXA and Metlife.

The issues companies are currently facing regarding the provision of EB are not new, he says. COVID-19 has not created these dilemmas, but rather cast a light on them and forced companies to address them as a matter of urgency.

“Employee appreciation for benefits has been on the rise, that is a long-term trend,” explains Rouot. “COVID-19 has caused this trend to accelerate.”

MAXIS GBN conducted research in the summer of 2020 canvassing the opinions of some 1,000 senior executives and employees based in 10 countries including the UK, Australia, UAE, Germany, the US and Brazil. It found that 46 percent of employees thought COVID-19 had made them reappraise the value of a benefits package when deciding to stay with or join a new employer.

Show me the benefits

The significance of this finding will not be lost on executives. In order to attract, and retain, the best talent, companies are under increasing pressure to up their game in the delivery of benefits to their staff. Failure to do so means risking losing the best talent to rivals, which will ultimately hit a firm’s bottom line.

While the goal is clear, the means of achieving it are less so. Providing the most competitive benefits is a cost, and while it is likely to save money in the long term if it reduces staff turnover and increases employee satisfaction, making these short-term investments is never easy.

Captive insurance, says Rouot, could be the key to ensuring companies can deliver world-class EB while keeping costs down.

“Captives are a great way to manage EB costs,” Rouot explains. “Captives have traditionally been more active on the P&C side, with EB left to human resources only. Over time that has changed as risk managers and chief financial officers have started to see EB as a cost and a risk.”

It is true that EB presents a lower severity and higher frequency risk than P&C, notes Rouot, meaning companies took longer to see it in those terms.

“More multinationals are starting to look at managing EB through their captives,” he says. “We are still in the early stages of the process and there is much more to do, but the pandemic has accelerated the trend.”

The case for including EB in a captive looks compelling once you start to analyse it. From a broader risk management perspective, the addition of this line of business can reduce the risk exposure in an existing captive which writes P&C business, because the lines are non-correlated, increasing diversification in the portfolio.

Perhaps more significantly, writing the business through a captive gives a company greater insight into the nature of the claims it is paying out on. By analysing claims, companies can start to think about controlling costs, not by reducing EB but by taking steps to prevent claims being made in the first place.

Rouot says: “Healthcare costs have been rising faster than inflation for a long time, something you can see everywhere in the world, in both emerging and developed markets. Preventing employees getting sick is cheaper than paying for their healthcare when they do get sick, plus employers get the benefit of a healthier, more engaged workforce and reduced absenteeism.”

The key, Rouot says, is to analyse the data that companies have about their employees. “Insurance is about data and employers rely on data to make effective decisions,” he says. “Technology can help employers analyse their data and improve their understanding of how their employees consume all their benefits, but especially health benefits.

“The more data they have the better the decisions they can make about their programmes, including taking preventive measures.”

One problem replicated many times

An added complication multinational companies face is the patchwork of legal, regulatory and cultural environments they operate in. In the last 12 months, for example, global companies have faced the challenge of dealing with different COVID-19 responses in different countries. Employees in London were still in full lockdown at a time when those in Asia had already started returning to their offices.

“This year employers have realised how vital EB are to protect employees,” says Rouot. “But countries have different rules and regulations. For example, in some countries, some policies will have pandemic exclusions, that means some employees weren’t covered for COVID-19-related claims. Employers with EB in a captive insurance programme were able to remove exclusions to ensure their employees were covered.”

MAXIS GBN has first-hand experience of the problem, having around half of its people in its London headquarters, with the other half spread out over a number of global offices across four continents.

Such a global footprint has its advantages: the experience of having team members working together across different offices was a plus when employees started working from home, as they were already used to using digital communications channels and collaborating without being together in-person.

Global companies are facing up to the fact that different cultures and life circumstances mean employees will likely have individual preferences for their benefits, says Rouot.

“All countries have different healthcare systems, which can make it difficult to offer benefits that are relevant and attractive to all employees. Of course, then there’s the challenge of managing and financing EB to consider too.”

These significant geographical differences are reflected at the local level by a trend towards increasing personalisation of EB programmes, allowing people to take a more ‘pick and mix’ approach. A medical plan that covers family members may be a big draw for parents, but is of little value to those with no spouse or children, for example.

“The era of ‘one-size-fits-all’ benefits is over,” says Rouot. “Employers are competing more than ever to attract the best employees and are using EB as a way to attract and retain staff, and offering personalised benefits is one way to do that.”

Another trend that could have profound implications for employees is the move towards portable benefits, where individuals build up benefits ‘credits’ which are linked to them rather than to a specific employer and move with them—a concept similar to that seen with pensions.

“This could be particularly important for providing benefits to workers in the gig economy in the future as multiple employers could contribute to EB packages,” Rouot says.

Innovation and technology

The unifying theme is bringing the spirit of innovation that is driving technology and the gig economy to EB, something MAXIS GBN is keen to lead on.

In 2018 the company launched the Digital & Digital Innovation Lab to explore different approaches to delivering EB and develop new products. It has rolled out interactive client reports as a core product for its captive, pool and global risk solution clients, breaking down claims to highlight trends and help make the data easier to understand, helping them to make better strategic decisions.

“When working with clients, our dedicated health and wellness team takes a two-step approach,” says Rouot. “The first step is where we analyse claims experience and provide reports to help employers understand where their costs are coming from.

“The second step is the prescriptive part, where we propose solutions tailored to the specific needs of the client to address the biggest cost drivers found in our reporting.”

Such an approach is helping an increasing number of companies provide compelling EB that improve employee satisfaction and ultimately reduce attrition, while making it more convenient for those who do decide to make a change in their career. It brings the convenience and flexibility that people have come to expect in other aspects of their lives, from ordering pizzas to renting holiday accommodation, into the world of corporate remuneration.