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What’s my health worth?
Gen Y employees are increasingly wanting to choose their own medical insurance terms. But do they really know what is best for them? Sabrina Zolkifi reports on what HR can do to prescribe the right insurance schemes for a new generation.
Issue Date - 01/07/2012
The financial outlook is starting to see brighter days ahead, and companies are becoming increasingly generous with benefits for employees.

Although business leaders are still in the habit of keeping costs low, organisations are learning how to provide for staff in innovative and engaging ways, while keeping attrition levels down.

Even though today’s idea of benefits can include everything from extended leave to gym memberships, insurance and medical health care will always top the list as one of the most important benefits.

“Employees will feel that the company is taking care of them,” says Yeoh Sai Yew, head of rewards and people services at AirAsia.

“At the same time, since this is a common practice in the market, it’s just like a salary package.

“Without a reasonable insurance plan, employees will go elsewhere.”

Despite insurance being important, it can quickly become a major point of contention for employees as the one-size-fits-all package becomes less applicable in today’s workplace, where Gen Ys are beginning to take up larger roles.

“Companies used to be able to make insurance decisions for their employees, but Gen Ys are outspoken and love to have their own say in things,” says Ahmad Lutfi, a Gen Y and the deputy CEO of Agape Group Holdings.

“Companies may not have the luxury of choosing the cheapest insurance packages anymore.

“As more Gen Ys enter (the workforce), companies will have no choice but to cater to employees.”

Raja Khairul Anwar, another Gen Y and a student with the University of Sunderland, adds it should be a given for employers to provide basic insurance benefits such as medical, dental and hospitalisation coverage.

It is the value-added flexible benefits that are a pull factor when choosing the right employment for Gen Ys entering the workforce.

As for companies that take the time to customise a package to suit younger employees, Raja says it will help staff feel “more taken care of, and considered within the company’s policy making, which then helps to increase staff loyalty.

“The young are increasingly picky when it comes to selecting the right company to work for,” he says.

Sebastian Tan, head of group insurance business at Tokio Marine Life Insurance, says organisations which listen and tailor to the needs of employees may be in a position to kill two birds with one stone because providing benefits unique to their employee demographic can give them that edge over competitors.

“Packages are getting more sophisticated; it is no longer just about conventional packages,” he says.

Flexible packages

By providing employees with flexible insurance packages, companies are able to segment their workforce demographic to allow each employee to choose the type of perks received on top of a core benefits package. Flexible benefits are certainly more expensive than regular insurance packages, but Tan says it is hard to determine how much more costly they are because it depends on the company and employee.

“It also depends on the person’s values in terms of their health or the likelihood to take advantage of the lower premium, but most of the time, it is still cheaper than buying it individually outside the company,” he says.

Raymond Lian, vice-president for the health department at AXA Affin General Insurance Malaysia, agrees businesses have much to gain from providing employees with the liberty to choose their own benefits.

“The benefits will be a more equitable way of allocating funds, as each employee gets the same amount of funding and can decide to purchase according to their specific needs,” Lian says.

Another long-term gain for the company is the ability to “provide management with the cost visibility at the beginning of the year compared to self-funding”. Lian says this will help avoid surprise over-runs and provide clear guidelines on what benefits are being provided and what are outside the scope of eligibility.

Although employees are set to gain from a flexible benefits structure, companies can expect to reach deeper into their pockets to tailor to customisation.

“From an insurance perspective, this would result in higher purchase claims and inevitably higher premiums,” says Rosalind Yu, head of employee benefits at ING Insurance Malaysia.

But that is not the only impact on businesses. Derek Goldberg, managing director for Aetna Southeast Asia, says it is not always advantageous to allow employees to choose their own scheme because insurers are more likely to offer more favourable rates for mandatory schemes than voluntary ones.

“Employees may also underestimate their health risks and the costs related to a serious health event, which may run into the tens of thousands of dollars,” Goldberg says. This concern is echoed by Tan, who says while some employers may be willing to allow their staff to decide on their own benefits, younger employees may not be “mature enough to spend it wisely”.

“Don’t assume that just because you are young, nothing is going to happen to you,” Tan warns.

He shares an incident where a company decided to reduce the core insurance coverage from 36 months of the monthly salary to just 12 months, allowing staff to use the difference to either top-up for additional coverage or spend it on other health-related expenses.

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