Mental health risk: employers and insurers need a joined-up approach

Personnel Today, August 2016

Employers should address rising stress and mental health risk through collaboration between internal departments and insurance providers. A dedicated employee risk manager is part of the solution, argues Andrew Woolnough, value propositions director at Willis Employee Benefits.

You would not cross the road without looking both ways, so why are employers and insurers of risk and staff benefits so blinkered when it comes to mitigating mental health and stress risk? Cross-functional teamwork is key.

Employee stress and mental ill-health issues are still on the rise. This is evidenced by a myriad of absence-related industry surveys, not to mention an increasing number of employers' liability claims.

Various business functions, including HR, risk, payroll, and health and safety, are doing their best to tackle the problem but, arguably, they are failing to see the full picture. True change, efficiencies and gains can only be made by joining up interdepartmental and insurer data, findings, interventions and preventions. This has proven a challenge too far to date.

Good practice on stress management

How to prevent claims of workplace stress
Two-thirds of employers in the UK identify stress as the top workforce health risk issue, according to the Willis Towers Watson "Staying@Work" report 2015/16, a global study of employers' health and productivity strategies. Many employers are taking steps to address this, but often without success. For example, two-fifths of employers reported an increase in stress-related absence and mental health problems in their organisation over the past year, according to the findings of the CIPD's "Absence management survey 2015".

This failure to nip the problem in the bud can lead to an all-too-familiar corporate endemic, characterised by employee disengagement, presenteeism, reduced productivity, short-term absence leading to long-term absence, an increase in insurance claims, and associated financial and reputational costs to the organisation.

General insurers paint an equally gloomy picture. Stress in the workplace is being likened to a "ticking time bomb" for the industry, with many insurers not having in-depth analysis of claims statistics for mental health conditions, according to the findings of a 2013/14 report by the Chartered Insurance Industry's (CII's) New Generation Underwriting Group, "Is stress the elephant in the boardroom?".

Where there is data available on employers' liability claims, it shows that overall costs have increased dramatically over recent years, from £10,000 in 2010 to £60,000 in 2012. This is despite the average cost of individual claims remaining fairly stable, which reflects an increase in the volume coming through.

The CII's report includes a statement from the one insurer that was able to supply stress claims data: "…circa one in four claims is for stress-related illness".

This article focuses on general insurers - or employers' liability insurers covering personal injury claims, to be specific - for good reason. HR and OH practitioners rarely read about this aspect in their specialist media. When it comes to insured products, employers' liability is generally the domain of the corporate risk department, and employee benefits are the domain of HR. Never the twain shall meet. The same division applies to the insurers responsible for these products and services.

As a result, coordinated data on potential stress and mental ill-health hotspots is being missed. What's more, employees going off sick or considering making an employers' liability claim for workplace-related stress and mental ill-health problems might be losing out on important interventions that could help them get back on track.

For example, typical interventions available via a group income protection (GIP) scheme include second-opinion GP services, confidential nurse helplines, employee assistance programmes, payment for certain treatment where long waiting times could incur greater absence and claims costs, plus the design and funding of rehabilitation programmes.

And, underlying all of this, the employer is no doubt missing out on the opportunity to reduce the size of insurance claims and their frequency, and improve productivity, motivation and morale.

Early intervention evidence

Willis Towers Watson has taken a look at the impact of early intervention on employers' liability claims and found data to support the hypothesis that the longer it takes to close a claim, the greater the value of that claim. Work is currently ongoing to understand the financial impact of various interventions on employers' liability claims experience.

This is a first for the UK industry and is fraught with complexities thanks to inconsistent data collection, more of which we look at later. However, the results from a similar, leading-edge study by Willis Towers Watson in Denmark makes clear the important gains that could be made.

Willis Towers Watson's Pathfinder programme in Denmark (2014) looked at the impact of early absence interventions made available via a company's existing GIP benefits. The study, which involved 115 closed Pathfinder cases, revealed total sick pay and insurance savings of almost £3.6 million, which on average corresponded to about £31,000 per closed case.

While employers' liability data in the UK is difficult to assess, analysis has been carried out on GIP data by insurer Unum, in conjunction with the Centre of Economic Research (2014).

The findings reveal that employees who have access to - and use - early intervention and rehabilitation services tend to have shorter long-term absences compared with those that do not. On average, the duration is shorter by 16.6%, which translates to a reduction of more than a year (60 weeks) in the average seven-year duration of a long-term absence. This suggests collaboration across business departments - in terms of data analysis and intervention usage - could pay dividends.

According to industry experts, HR and risk managers are evolving into business partners; in effect, a consultancy-type service involving more frequent dialogue at board level. But whether or not this will lead to more HR and risk collaboration is debatable.

Human capital is the number-one challenge on the minds of chief executives (10% higher than operational excellence), according to The Conference Board CEO Challenge 2015 - an annual global survey of CEOs' most pressing business challenges.

In line with this, HR skills will need to keep pace with business and employee expectations. For example, research reports a shift in the concept of a career. With a greater emphasis on mobility and the accumulation of experience and expertise, HR will need to take the lead to create an environment that continuously matches the needs and wants of the workforce - for growth and development - with the needs of the business - to manage capability, cost and risk - as described in the book Lead the Work, co-authored by Ravin Jesuthasan, a managing director at Willis Towers Watson.

Similarly, ACE Group reports, in "The changing role of the risk manager", that the risk management profession is no longer expected to just monitor, but to lead. The report finds that complex, interrelated risks - largely brought about by new technology, globalisation and changes in governance and compliance - are leading risk managers to evolve from assessing only financial or contractual risk to other corporate functions such as HR and IT.

If human capital is the number-one challenge for CEOs, it is surprising to note that only one-third (29%) of risk managers interviewed for the ACE report strongly agreed with the following statement: "The risk manager is increasingly a business partner working collaboratively with relevant functions such as HR and IT". Either the CEOs have not communicated their most pressing concern very well or the benefits of collaboration have yet to be realised.

Language barriers

One of the main barriers to collaboration, according to the CIPD, is that there is no common language across HR, risk and other key business departments, such as finance. The CIPD is currently working in partnership with various industry and government bodies to develop its "valuing your talent" framework.

Willis Towers Watson is also contributing its employee risk expertise to this project. The framework is designed to help companies understand and measure the impact and contribution of their non-financial assets - their people - to business performance.

Meanwhile, according to the ACE Group report, the statement with which risk managers most strongly agreed was: "The use of big data and analytics will transform risk management in the future". And there is no denying that collaboration will be essential to success in this regard.

Data could be the key to collaboration within companies and across insurers, particularly with regard to managing and mitigating workplace-related stress and mental ill-health issues. All it requires is careful coordination in the early stages of sickness absence - ideally, on the first day.

Success also depends on the joining up of absence data with other data sets to allow trends and issues to be identified. According to the CIPD's annual absence management report, just one-third of organisations combine absence data with other data, such as engagement surveys, health and safety or recruitment and retention. Those that did were twice as likely to achieve their absence target (34% versus 16%).

Although data is key, it is also a conundrum, as shown by Willis Towers Watson's analysis of the impact of interventions on employers' liability claims. According to the CII's New Generation Underwriting Group, two key things are required in order to gather and accurately analyse employers' liability claims data: first, uniform reporting of stress by employers; and second, employers' liability insurers must agree a standardised industry definition of workplace stress.

General insurers state that for a successful claim under an employer's liability policy, stress must be covered in the policy wording. The CII's report, "Is stress the elephant in the boardroom?", found that about 50% of employers' liability insurers specifically define "mental injuries" in their policy wording, but only one details what types of mental injuries would be covered. The CII is currently trying to set up a working party to come up with a standardised industry definition.

Although the current level of claims is still manageable, according to the CII, it concludes that there is potential for a significant increase in frequency. This could come about, says the report, if there were changes in legislation, social attitudes or scientific studies linking the workplace to stress. Some of this is already coming to pass.

Eliminating stigma surrounding mental health problems
A mental health report published in February 2016 by a taskforce set up by NHS England and led by the charity MIND is helping to highlight some of the problems faced by individuals, the NHS and society as a whole.

The "Five year forward view for mental health" report found that about three-quarters of people with mental health problems in the UK receive no help at all. Announcing the launch of the report, MIND chief executive Paul Farmer said: "Stigma still exists across the health service as it does in society."

In a bid to help meet some of the report's key recommendations, the Government has committed to £1 billion a year in extra funding by 2020 for access to talking therapies and also a screening programme for those with mental health problems to help detect any related physical health conditions, such as heart disease or diabetes.

The report also recommends that all areas of society - including workplaces - need to contribute to the promotion of good mental health and prevention of mental health problems.

Many employers have plans to move in that direction. More than two-fifths of the UK employers surveyed in Willis Towers Watson's latest "Staying@Work" report said they are focused on strategies to build a culture of health and wellbeing in the workplace, with more than 80% of those predicting they will be in place by 2018.

However, employers might be well advised to listen more closely to the views of their staff on workplace stress and tailor solutions to their needs rather than what the employer thinks think they need.

The Willis Towers Watson "Global benefits attitudes survey" provides insights from nearly 30,000 employees in 19 countries. It found that the top causes of workplace stress from the employees' perspective are inadequate staffing, low pay, unclear and/or conflicting job expectations, company culture and lack of work-life balance.

Yet the bulk of workplace stress reduction programmes implemented in the UK seem to focus primarily on work-life balance and on mitigating any negative effects of excessive organisational change on employees.

Although the main causes of stress and mental ill health do not look set to change in the near term, the corporate response to the problem can change right now.

Connected solution

It starts with the implementation of a robust, day-one absence notification system, coupled with medical case management, involving registered nurses, physiotherapists or mental health professionals.

This team coordinates access to treatment, where required, making full use of a company's existing interventions funded by insurers or under the Government's Fit for Work scheme. It also works closely with OH to ensure the implementation of any return-to-work plans.

A dedicated employee risk manager, who liaises closely with the medical case management team, provides a central point of contact for all relevant parties, including HR, risk, OH, health and safety, payroll and line managers. The employee risk manager also takes charge of aggregated management information to explore absence trends and issues.

This fully coordinated approach is possible now. However, success requires a forward-thinking employer and equally forward-thinking support from a consultancy that can provide the requisite staff risk, medical case management and human capital expertise.