Employers versus brokers: Are workplaces a competing distribution channel or a new opportunity?

The workplace has certainly changed a lot over the past 30 years – not only is the traditional 9am to 5pm working day pretty much redundant with the introduction of flexible hours and remote working, but employers are also increasingly concentrating on improving the workplace experience for staff, focusing on creating environments that bolster wellbeing, engagement and productivity.

One piece of this puzzle is undoubtedly an organisation’s employee benefits package, which will typically include products such as income protection, critical illness cover and a workplace pension.

However, Rose St Louis, insurance director at KPMG, believes that more employers are expanding this benefits offering to include more insurance-based products, such as home and travel insurance.

This, she said, means the workplace becomes a competing distribution channel.

She explained: “You’ve got the workplace getting involved more and more. If you think about what employers are trying to do, they’re not offering just the company pension scheme and a bit of death-in-service, they’re offering things like income protection and critical illness cover.

“They’re offering different access and different partnerships and reward schemes for car insurance, health insurance and travel insurance, as well as home insurance and then other kinds of benefits, such as gym [memberships].

“You’ve got that push of those sorts of products through the workplace so you’ve got different channels all competing for the attention and to capture the hearts and minds and build trust with the customer.”

The broker-workplace relationship

However, Peter Blanc, group chief executive at broker Aston Lark, revealed that that employers acting as a distribution route is not a “new phenomenon” – in fact, it can reap benefits for both brokers and insurers.

“Many brokers and insurers have created products for affinity groups including trade associations, unions, large employers and indeed sectors of public workers, such as the police,” he explained.

“Over the years, insurers have offered simple personal accident products, legal expenses products, motor insurance and now insurers and brokers are trying to offer household and travel insurance.”

Blanc added that in most cases, it is brokers that initiate conversations with affinity groups in order to generate more business.

He continued: “It’s a broker that negotiates the deal with the insurer and works with the affinity group to agree a marketing strategy.

Occasionally, this will entail making the affinity group an appointed representative of the broker to facilitate doing business with members of the affinity group.

“The theory is simple enough - if the target audience is large enough and insurers believe that they will be able to win a significant volume of clients, then they will offer enhanced cover or reduced premiums as a unique selling point to win this business.”

Insurance products offered via the workplace can be white labelled, however Blanc said that more often, brokers can achieve a ‘recommended partner’ status, so that employers refer their staff to the broker directly for any assistance.

Brand benefits

One of the plus points of these arrangements for brokers and insurers is that they can potentially see greater engagement with the end product because of the “brand strength of the affinity group”.

Many consumers are still mistrustful of the insurance sector – research published by YouGov last September, for example, found that 68% of policyholders believe that providers will do whatever they can to avoid paying out in the event of a legitimate claim.

Employers, on the other hand, are often viewed as paternal, especially with the increased focus on staff health and wellbeing that is currently on many organisations’ agendas.

A report by professional body the Chartered Institute of Personnel and Development (CIPD), published in March, found that 61% of respondents believe that employee wellbeing is on senior leaders’ agendas this year.

“Where you spend most of your time is at work and you see your employer as paternal, so therefore you expect them to talk to you about not just pensions and life insurance but also the wider piece around home, contents, travel insurance as well,” St Louis added.

Brokers and insurers can benefit from this perception, agreed Blanc.

He said: “It is true to say that the reason these arrangements can be successful is that the broker [and] insurer benefit from the brand strength of the affinity group.

”If the end client has a strong, trusted relationship with the affinity group, whether it’s their union, their employer or their trade association, then they will naturally trust products that their affinity group offer them.

“Insurance is all about trust and many clients will find it reassuring to deal with their affinity group if the product being offered looks good and appears to represent good value for money.

“The broker sits behind this relationship, making sure that the product is fit for purpose and works as it should.”

Broker specialisms

Although distributing insurance products through employers and workplaces can present opportunities for brokers, Nick Houghton, group managing director at JM Glendinning Insurance Brokers, warned that “one size does not fit all” and that employees might not always be best served by this type of insurance offering.

“Employment benefits are great, but one size does not fit all and employees with particular insurance needs will still need more specific advice and, in reality, they can probably still get these classes cheaper using a comparison site,” he said.

“Generic insurances provided by non-insurance channels is a risk to me, for example relying on your credit card to provide travel insurance is risky.

“There is no substitute to insuring something properly via someone who does it all the time.

”As employers, we have a responsibility to only provide a benefit to someone if it is appropriate for them and, when it comes to insurance, we all have different needs and risk appetites.”

St Louis agreed that “there’s always a place for the broker” when it comes to more complex insurance matters.

She continued: “There’s always a need to take advice, whether it’s your SME business, whether it’s you’re leaving your company and you’re going to set up your own business and you need a bit of hand holding because you don’t know what you don’t know.

“Whether it’s your own liability insurance, you now have a commercial property, you’ve got liability for employees, you need help with that; you can’t go to an aggregator and get that sort of help. There is no workplace that offers that sort of help.

“That’s where partnerships with brokers and accountants need to really come together and wrap their arms around the client to make sure that they’re looked after.”