Captives and employee benefits: stress, mental health and wellness

Employee health and wellbeing is arguably one of the most challenging risks companies face today. Tackling issues such as an aging workforce and ever-increasing medical costs, while attracting and retaining top talent, means that benefits are being used in broader ways, and benefit financing therefore is becoming an increasingly important area of focus.

Particularly evident is the emergence of stress and mental health concerns. It has been estimated by the Global Burden of Disease Collaborative Network 2017 Study (Seattle, US: Institute for Health Metrics and Evaluation) that 264 million people worldwide suffer from depression.

The Tokyo Declaration (a consensus signed by experts from Europe, Japan and the US in 1998) noted that changes to work environments are very likely to cause significant stress levels in employees, and should be managed by businesses. As changes are increasingly rapid in businesses, this is coming further to the fore.

Many employee benefits programmes address these health concerns. As health costs for businesses increase, companies are exploring the use of captive insurance to help to provide these expanded services to employees in a more cost-efficient way.

Why is wellness and mental health under the spotlight?

According to a report from Wellbeing and Business in the Community titled National Employee Mental Wellbeing Survey Findings 2017, 77 percent of UK employees experience symptoms of poor mental health at some point in their lives. Mental health issues can be triggered by a variety of factors, including biological issues or life experiences (such as trauma or abuse). The same report states that 60 percent of UK employees who experienced a mental health issue cited work-related stress as a contributing factor. A May 2019 World Health Organization (WHO) study on mental health in the workplace estimated that the cost of depression and anxiety is $1 trillion per year globally in lost productivity.

Mental health symptoms often went unnoticed in the past, but society is becoming more understanding and companies are doing more to support their employees who have mental health problems. These issues can affect individuals and their families, friends, colleagues and the wider community. The WHO highlights in a separate Workplace Policy Programmes report the impact mental health issues have on the workplace through absenteeism, reduced productivity, and greater direct costs to businesses.

Employers can give support to either pre-empt issues, or offer support when they arise, to make sure employees are given the help needed to get back to health and work. The same WHO study found that for every $1 put into treatment for mental health, there is a return of $4 in improved health and productivity.

How a captive helps

The number of captives participating in multinational benefits has grown 243 percent over the past five years, according to Marsh’s 2019 Captive Landscape Report.

Traditionally, multinational organisations managed employee life, medical, disability and accident insurance through local placements. This is not the most time or cost-efficient way—particularly given the lack of visibility of claims and expenses—so global centralised employee benefits programmes could be seen to generate significant savings.

A captive can potentially generate further savings, and offer oversight on spending, capital and claims areas.

A captive can bring a number of efficiencies to a global benefits programme in addition to the traditional advantages of reduction in external costs and retention of underwriting profits. Adding benefits to an existing captive can also provide diversification where there are pre-existing running costs, and offer some reduction in solvency requirements as benefit risks are uncorrelated with traditional risks such as property damage.

Also important for wellbeing programmes, a captive can offer flexibility of plans, wordings and terms and conditions, which means coverage can be extended for employees who require support. A captive can also provide data for the global business to help make informed decisions, and provide a risk management fund for pre-emptive work to be done.

If a business is seeking to explore additional ways to support the mental health of its employees, the data collected in the captive can be monetised; companies can either buy coverage and reinsure it, or write wider or expanded coverage through the captive using the information built up in the global programme.

A captive can support a company’s long-term strategy. Some of the key benefits include:

The captive’s data can be used to influence risk management policy and thus communication around the business and support for employees. Companies can offer consistent coverage for all employees worldwide via a captive; this can mean that all individuals are accessing appropriate insurance and cared for in the event of a problem.

A captive can take third party premium for additional voluntary benefits which can be tailored to an employee’s needs, and reinsure voluntary benefits so that there is no catastrophe loss.

Conclusion

When creating a strategy of long-term value, wellness, stress and mental health issues are natural areas for consideration. Maintaining an up-to-date employee benefits programme which delivers for employees and contributes to their health and happiness can hugely benefit businesses.

According to Marsh’s report, the number of organisations and risk professionals embracing captives as a tool to secure their future continues to grow.

Employee benefits is an important part of this trend; captives can be expanded to include wider aspects of employee wellbeing, to secure optimal coverage, and maximise the efficiency of a captive, and of the wider global employee benefit programme.

These programmes can improve safety, and reduce illness and injury, while also enhancing employee engagement and improving recruitment and retention.

Alexandra Gedge is business development and captives executive at Marsh. She can be contacted at:  Alexandra.gedge@marsh.com