Sibongile Gcabashe, Senior Consultant at the Sygnia Umbrella Retirement Fund

For many years, selecting a group risk insurer was relatively straightforward. Employers and trustees compared premium rates, benefit structures, underwriting terms and claims experience before making a decision.

Today, that decision is more complex. South Africa’s leading insurers are increasingly supplementing traditional life, disability and income protection benefits with a range of value-added services, including grocery benefits, baby benefits, emergency medical services, telephonic legal advice, virtual healthcare consultations, funeral assistance and repatriation of mortal remains.

These benefits provide additional support to members and their families, but they also raise an important question: Are they enhancing member outcomes, or are they becoming “golden handcuffs” that make it more difficult to change insurers when circumstances warrant it?

More than just insurance

Many of these benefits address real challenges faced by South African employees. A grocery benefit can provide immediate financial relief following a qualifying event. A baby benefit can help families manage the costs associated with the birth of a child. Funeral assistance and repatriation services can provide valuable practical support during a difficult and emotional time.

Unlike traditional risk benefits, which are only accessed when a claim arises, these value-added services often provide tangible support throughout a member’s working life. This can help employees better appreciate the value of their benefit package.

The challenge of comparing insurers

While these benefits can be valuable, they have also made insurer comparisons significantly more difficult. Historically, consultants and trustees focused on key factors such as cost, levels of cover, claims experience, underwriting terms and service delivery. Now they must also compare an array of ancillary benefits that vary from insurer to insurer and may be difficult to assess on a like-for-like basis.

One insurer may offer a grocery benefit and baby benefit, while another may provide enhanced emergency medical support or a broader suite of assistance services. Determining which offering delivers greater value is not always straightforward.

Are add-on benefits becoming golden handcuffs?

The growing reliance on value-added benefits may have an unintended consequence. Over time, these benefits may become embedded in an employer’s employee value proposition. Members become accustomed to having access to them, and employers invest time and effort communicating their availability.

When an insurer subsequently increases premiums materially above market levels, employers and trustees may find themselves reluctant to switch providers, even where a better-priced alternative exists.

The concern is not necessarily that the benefits lack value. Rather, it is that their presence can make change more difficult. A competing insurer may offer better pricing, stronger underwriting terms or a more sustainable long-term solution, but the prospect of removing familiar benefits can become a barrier to moving. In this way, value-added benefits may serve not only as member support tools but also as powerful retention mechanisms for insurers.

One size does not fit all

Perhaps the most important question is whether the benefits being offered are aligned with the needs of the membership. A benefit is only valuable if it is relevant to the people it is intended to serve, and different employee groups face different challenges.

For a predominantly blue-collar workforce, benefits such as grocery support, funeral assistance, repatriation services and emergency medical assistance may deliver significant value because they address immediate financial and practical needs. However, a workforce comprising accountants, attorneys or other professionals may place greater value on services such as virtual healthcare consultations, health advisory services or legal assistance. The starting point should always be the needs of the members, not the features of the product.

This is where the employee benefits consultant can play a critical role. The objective should not be to select the insurer offering the longest list of additional benefits. Instead, consultants should seek to understand the demographics, income levels, family structures and needs of the membership before assessing which benefits are likely to provide meaningful value.

Value-added benefits can undoubtedly enhance the member experience. However, they should complement, not overshadow, the primary purpose of group risk insurance. When reviewing insurers, employers and trustees should continue to focus on the fundamentals:

• Appropriate levels of cover;
• Sustainable pricing;
• Fair and efficient claims management;
• The financial strength of the insurer; and
• The overall suitability of the risk solution.

A grocery benefit or baby benefit may be appreciated by members, but such benefits should not outweigh the quality and sustainability of the core risk arrangement.

Final thoughts

The debate is not whether grocery benefits, baby benefits, funeral assistance or healthcare support services have value – many clearly do. The real question is whether those benefits are relevant to the membership they are intended to serve.

A well-designed risk solution should be built around member needs, not marketing features. If value-added benefits improve member outcomes and address genuine needs, they have earned their place in the benefit structure. If they simply make it harder to change insurers, they risk becoming little more than golden handcuffs.

For employers, trustees and consultants, the challenge is in knowing the difference.

ENDS