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The growing phenomenon of renewal by paralysis

Posted by Our Secret Benefits Consultant on Nov 2, 2018 9:00:00 AM


I know many HR people and, in my experience, not only are they lovely people to work with, they are also extremely well qualified.

They know their way around employment law; they are great at designing benefit packages and can also have a stab at writing branding guidelines. However, when it comes to insurance, most HR professionals will confess they aren’t experts.

As this is the case, I’ve often wondered why they are tasked with signing off on company medical, life and income protection insurance – which can be huge costs for organisations when other insurance policies, such as buildings or business, are usually signed off by the finance director.

It makes little sense to me. The HR manager is unlikely to have qualifications in risk management, finance and insurance and can feel out of their depth.

Ask your HR department to set up a Healthcare Trust for instance and discuss the benefits they offer larger organisations. Most wouldn’t have a clue. I am not having a dig at them – it’s just not their area of expertise.

As far as I am aware, most HR courses don’t include insurance modules, so knowledge gained tends to be on the job. You may be thinking, why is this an issue? Isn’t this just part of an HR professional’s job?

Well, I’m coming across more cases at policy renewal time of HRs sticking with the same insurance provider as they are too fearful to make a change. Often this is in spite of the fact they could get a better deal elsewhere and potentially slash their premiums by thousands of pounds. As an industry, we term this, ‘renewal by paralysis’.

A recent case in point is when I worked with a client to reduce their medical insurance bill from £2 million down to £1.6 million. This huge saving of £400,000 was something I believed the HR manager would leap at the chance to achieve.

However, this wasn’t the case.

After careful consideration she decided not to go for it. She was not willing to take the chance that should their claims go over budget they could end up paying more, even though we had very carefully worked everything out and this really was the best policy for the company.

So instead they stuck with the more expensive policy, with the same insurer they had been using for years, simply because if anything went wrong, she could say that she hadn’t made the initial decision to go with the insurer but had simply renewed it. Therefore she couldn’t be blamed.

I can completely understand her decision. She didn’t feel she had the expertise to be making such a big decision and rather than taking a chance, stuck with what she knew.

But this lack of HR expertise in insurance is costing companies money. Instead of changing policies many companies are just sticking with what they know.

The big question is should HR courses also include a module on insurance, so that HRs are more confident in this area? I believe the answer is yes. Giving HR professionals the skills to be able to make better financial decisions is crucial.

At the very least I believe they should be working more closely with finance to buy insurance to ensure the best deal for the company.

What do you think? I’d be interested in your views and whether you think we are asking too much of HR when it comes to making big financial decisions about insurance?

Topics: employeebenefits, employee benefits, HR