There has been an increased preference among employers to include severe illness products in their group risk benefit suite over the last few years.
“We think the increased prevalence of these severe illnesses – cancer in particular – is driving this trend,” says Viresh Maharaj, chief executive for corporate sales and marketing at Sanlam Employee Benefits.
This is one of the trends that emerged from interviews with professional employee benefit (EB) consultants that were conducted during the initial stages of the annual Sanlam Benchmark Survey.
Cancer, strokes and heart attacks are some of the diseases considered severe illnesses. While employers often include disability cover as part of their group risk benefits, severe illness cover has historically not been offered as part of the group risk suite.
Maharaj says these products come at a different cost and as a result, funds or employers have looked to restructure their risk suite to affordably accommodate severe illness benefits alongside other disability-type products.
Another driver behind the trend is that decision-makers are getting older and see people in their own networks being diagnosed with severe illnesses.
Maharaj says consultants have consistently pointed out that employers as well as retirement fund members consider healthcare to be more important than retirement provision.
While most members are not on track to maintain their standard of living in retirement, the cost of private healthcare is still a higher priority as it is something that can make an immediate difference in people’s lives.
‘The most significant cause of financial stress’
Internal research conducted among Sanlam staff echoes this finding, with employees citing medical expenses as the most significant cause of financial stress.
Maharaj says five to 10 years ago severe illness cover was generally not considered relevant in the group risk market – consultants did not want to sell it. Today, consultants themselves are indicating that it is a major need.
“The costs of healthcare are becoming prohibitive and so we are seeing medical aids changing product structures to be far more conscious of how individuals can help to structure their health budgets.”
Over the last couple of years, several primary health insurance products have been introduced with the aim of providing a degree of support for private care.
“Gap cover is being seen as almost a necessity by consultants now as well, given that medical aids can only go so far.”
Asked what they would like to change in the industry, many consultants indicated that they would like a specialist employee benefits consulting licence to be introduced. The Financial Advisory and Intermediary Services (FAIS) Act categorisation for pension benefits is broad and doesn’t require actual specialist expertise or experience.
“The view of the EB consultants is that you’ve got a vast number of retail advisors who dabble in employee benefits who may not be providing the appropriate level of advice through to their clients and that there needs to be specialist qualification.”
Other wish-list items are that there should be greater alignment between the Financial Sector Conduct Authority (FSCA) and the industry itself to improve retirement outcomes, and that the fixation on costs should stop.
Consultants also want members to take more ownership.
“As much as we can educate and advise and influence, ultimately the individual has to take ownership of their retirement funding journey and to a large extent that is not there at the moment.”
A major blind spot is the risk of cybercrime. Consultants are not equipped to evaluate cybercrime risk when evaluating retirement funding providers. The same goes for trustees.