Longer careers, higher costs: group risks for employers

Age diversity in the workforce is more prevalent than ever, driven by longer life expectancy and extended careers. Gen Z, Millennials, Gen X and Baby Boomers now work side by side. 

Our research on The Generation Game: Maximising the potential of a multigenerational workforce shows that 27% of Baby Boomers (those 60-78 years) have delayed retirement because they want to continue working, with 15% planning to. Others are doing so for financial concerns (21%), and 7% have returned to work after retiring, for financial reasons.

Having multiple generations within the workforce brings a wealth of benefits to employers but also poses challenges. A key challenge for employers is that as working lives are extended, they are faced with growing costs for group risk and other healthcare-related insurance.

A group risk benefits policy is aimed at providing financial protection to employees and their families in the event of death, disability, or illness – it can include life insurance, income protection and critical illness cover. Private medical insurance (PMI) by contrast aims to treat current health problems, offering access to private healthcare and treatment for a range of medical conditions.

It's an unavoidable reality that the older you get, the higher the likelihood of requiring medical care. More complex conditions come with higher treatment costs, which in turn influences future premiums.

Implications for employers on group risk and healthcare benefits

Health and wellbeing: As mentioned, as employees age, health-related issues will undoubtably increase, which can influence the cost and structure of benefits and policies. This increases the likelihood of claims being made and results in higher future premiums for employers.

Product design and availability: As the length of working life continues to extend, insurers may need to adapt their product designs to cater to an older workforce, potentially removing or easing age-related limits or exclusions. 

The downside is that employers may find it more difficult or too expensive to secure comprehensive cover for older employees. While private medical insurance (PMI) generally does not impose a mandatory cease age, other group risk benefits in the UK end at age 75 for group life assurance and age 70 for group income protection. Any extension of these age limits will inevitably increases the insurer's risk exposure, which is likely to be reflected in higher premiums.

Potential uninsured liabilities: Given that insured benefits are typically used to reinsure a contractual benefit promise, it’s vital that employers check to ensure contracts of employment only guarantee a benefit if it’s insurable and available at an affordable cost. If not, they may be left with an uninsured liability.

Strategy and policy considerations

Review benefits on a regular basis: This may seem an obvious thing to suggest, but a regular review and appraisal of insured benefits, or even new alternative benefits, will ensure they remain fit for purpose and affordable.

The review process should include:

• An analysis of claims data, particularly around health-related benefits, as this will highlight what risk and associated increased costs can be attributed to older workers. 
• Exploring the possibility of offering flexible or tiered benefits, meaning that employees can select benefits which are suited to their age and health needs.
• Reviewing different benefit options and alternative providers in the market to ensure best return on investment is obtained.
• Depending on the size of the workforce and scale of benefits being provided, perhaps consider different ways of funding cover such as self-insurance or for PMI, risk-sharing or medical trust arrangements.

Open communication with employees

It is vital that there is transparent communication with employees around how longer working lives will invariably impact on the provision of benefits.

Areas worth considering include clearly communicating any changes to benefit plans or eligibility criteria and providing employees with access to resources that support long-term health and productivity - for example, through the value-added services increasingly offered by group risk insurers.

Seeking expert advice

Employers should seek advice from insurance intermediaries and legal professionals - they are well placed to ensure employers are kept fully up to speed with age-legislation issues and changing benefits for an ageing workforce.

Broader considerations

Age discrimination

It is vital that employers understand age discrimination legislation when considering any changes to employee benefits. This is to ensure that age is not the driving factor in making decisions, rather more objective factors such as risk and premium cost.

Health and wellbeing  

Proactively promoting employee health and wellbeing, along with preventative pathways can help reduce risks linked to an older workforce. 

Adaptations in the workplace

While not an insured benefit, making reasonable workplace adaptations can play a key role in helping older employees remain in work for longer. By actively addressing how longer working lives impact on health and group risk benefits, employers can both ensure employees are provided with meaningful benefits and support in a cost-effective manner.

The value of a strong benefit offering

BW’s recent research ‘The Generation Game’ shows that Baby Boomers (those 60-78 years) are becoming increasingly concerned with benefits offered in workplaces, which they feel are geared more towards a younger workforce. 23% feel that benefits are more catered to younger generations, while 28% feel they are not given guidance on pension options, or flexible work options as they approach retirement (28%).

However, there are strong benefits to offering good employee benefits, the key ones including attracting and retaining top talent, boosting morale and productivity, cultivating a happy and healthy workforce. 

Read our ‘The Generation Game’ research. This article is essential reading for HR Directors, Chief People Officers, Chief Operating Officers, and other senior leaders looking to integrate workforce insight into business strategy.

Whether you’re addressing retention, performance or workforce resilience, this content will help you turn generational complexity into a strategic advantage.