• Best Intentions

    …may not be enough!

The Difference Between Success and Failure

Whilst on the surface mutual schemes can seem obviously simple, to be competitive in the marketplace and appear fair and attractive to all schools, running these schemes is anything but simple. Many local authorities have discovered it is very difficult to achieve by themselves without substantial resource. Some local authorities struggle on, some give up, but some use our services to give them a decisive advantage based on captured factual information and application of recognised insurance and statistical techniques.

Keys elements of successful schemes

In order to be competitive you must offer similar levels of benefits and terms must be broadly similar or exceed those of commercial insurers. If you do not then schools will be cherry-picked away from your scheme.
Once you offer lots of choice and flexibility then it then becomes harder to keep track of what’s what and control it.
This is where Esphera’s ACMS software service comes into its own and allows you to know precisely what is going on and what course of action to take in any particular scenario no matter how complex.

It is easy to request competitive contributions but they must accurately reflect the risk profile of each school. It is easy to set realistic contribution charges to keep your scheme in the black but these may then be uncompetitive in the market. Doing both is difficult but wholly attainable and is made much more simple by utilising the knowledge and technical tools we have available at Esphera.
Knowledge of the way the best schemes work and knowing the insurance industry is extremely helpful when it comes to devising your scheme rules and terms and conditions. Get it wrong and you will not get enough schools wishing to participate in your scheme. That’s why you can use the knowledge we have obtained over the years at Esphera to ensure that your scheme really does become as competitive as it could possibly be.
If you are unable to analyse your absence data accurately and in a meaningful insurance focused manner then you will not be able to set your contribution charges at the appropriate level. This underpins the whole basis of a mutual scheme and is vitally important in order to keep the scheme in the black and keep schools attracted and wanting to take part. Esphera’s ACMS software allows you to obtain precise metrics to keep your scheme on track with the minimum of effort.
In a complex scheme administration and processing of absence data can take up a high proportion of time. In fact the better your scheme is from a choice and benefits perspective and therefore more attractive to schools, then the more complex it becomes to manage the scheme. Our ACMS software will present you with all the relevant information at each step and minimise the amount of work you need to do to keep the scheme operating efficiently and on track.

Trying to administer a complex scheme for many schools using paper and spreadsheets can become a very confusing process. Dealing with queries takes much longer when you have to resort to locating several pieces of paper.
Having everything in one place exactly where you need it is essential to the efficient operation of a mutual scheme. When everything is automated according to your configured rules then nothing is forgotten and all the correct considerations are made. Calculations are accurate and mistakes are avoided at the outset. Esphera has the only software platform specifically designed to deal with any kind of mutual absence scheme. Why make your tasks any more complicated than they need to be? If the everyday tasks are carried out swiftly and without drama then you have much more time to concentrate on the strategy of your scheme and the analysis of what is happening to continually improve and perfect your scheme. You can advise existing schools and attract new schools to strengthen your scheme always knowing that you are basing decisions on detailed underlying information.

Factors that cause problems and schemes to fail

Simple rules often means that there is not sufficient differentiation between schools and their risk levels. Some schools may be bundled in with others which have a much more varied absence pattern amongst the different staff categories. This ends up with some schools unfairly subsidising others which means that eventually a more focused commercial offering will lure those disadvantaged schools away and leave the scheme with the higher risk schools in a risk banding that is unrealistically low. The result is more being paid out than being received and pushed the scheme into a more precarious position.

REMEDY: Offer lots of choice and benefit options and analyse different schools individually and accurately for the choices they want.

Some authorities try to keep rules simple and offer only a very limited choice of benefits and options to schools. All schools are different and many require something outside of the standard. Commercial insurers are able to cater for the differing requirements and can therefore provide attractive alternatives to “basic” mutual schemes which are not flexible enough. Once enough schools have been tempted away the volatility of the scheme increases and it becomes ever more feasible for the scheme to lurch from profit one year to deficit the next until eventually the deficits start to make the scheme unworkable.

REMEDY: Offer lots of choice and benefit options and analyse different schools individually and accurately for the choices they want.

This normally means some schools paying way too much and some way too little, or both.

If contributions are too high then schools will migrate to the commercial providers and leave the scheme with those schools paying too little for their risk, therefore creating an imbalance between contribution and payout.
If contributions are too low then these schools jump at the opportunity to be in the scheme because the costs are much less than elsewhere. The problem is that these schools collectively and consistently over the long term take more from the fund than they contribute and therefore weaken the financial viability of the scheme.
Having both types of schools in a scheme means that in the short term the fund can balance its books but eventually the payouts will outstrip the contributions and the scheme will struggle and fail.

REMEDY: Analyse the risk of each school and staff category individually and accurately establish true risk patterns and factors. Charge each school appropriately and if they prefer a commercial offering let them take it as it will only provide a short term gain for them whilst compromising a sensible and realistic charging structure will have a negative effect of your scheme,

Some scheme organisers do not get the absence rates and charging factors accurate enough for schools and at the end of the year they see a deficit. In the following year they just raise the contribution by a fixed percentage to cover the losses. Again this is a knee-jerk reaction to the inaccurate or generalised setting of contribution levels. Whilst it may temporarily create more income, it does so unfairly to some schools and therefore they will start to fall into the potential “poach-zone” of commercial providers. It is always the low risk schools which end up disadvantaged and pushed towards a commercial insurance solution leaving the scheme with the high risk schools. This leaves an unhealthy balance of schools in the scheme which ultimately undermines its viability.

Another way in which contributions become uncompetitive is where the organiser charges too much to operate and manage the scheme pushing the costs up into commercial insurer territory. Organisers should be able to run a scheme for about 10% of the total fund size. Any more and they are either operating inefficiently or are profiteering at the expense of schools.

REMEDY: Accurately analyse the risk inherent in each individual school and charge realistic contribution fees based on that.

Like it or not mutual schemes are competing with commercial insurers and to make a mutual scheme successful you have to know what the commercial market is offering, how they operate and you have to offer something better than that. Schools are much more financially aware these days and will choose a strong insurance option over a weak mutual option. Therefore mutual schemes have to have the correct inclusions and exclusions in the terms and conditions and be able set their contributions accordingly and realistically.

REMEDY: Get to know how the insurance market in general is operating and what things schools like to have and which are gimmicks offered by commercial insurers with little value and how you can combat those. Ensure that this is communicated well to schools during renewal periods or when promoting your scheme.

If you have a very complex set of rules and terms and conditions then it can become almost impossible to make head or tail of all the data you have available. It is not a simple task to dissect it and work out what it all means and can become incredibly confusing.

REMEDY: Use a software system that is designed to cater for all the complexities of different offerings and different benefit levels. You could build your own if you have a lot of resource or use the Esphera ACMS.

When too many errors creep in then the fund ends up paying out too much money unnecessarily which in turn pushes up contributions and can then start to make the scheme uncompetitive. Errors are normally caused by an unwieldy manual process where it is difficult to keep track of everything that has been going on, has been agreed to, and what the exact rules are.

REMEDY: Use an automated system that keeps an eye on everything for you and tells you exactly what you need to know.

When there is too much paperwork then information can become lost or it becomes difficult to cross reference all the relevant pieces of information which make up the scheme. Things get missed and mistakes are made.

REMEDY: Use an electronic software system to ensure all the correct information is captured and is integrated with the rules and terms and conditions to ensure that correct payments are made and that accurate reports can be produced from which appropriate decisions can be easily made.

The core service Esphera Solutions provides is an outsourced integrated web-based Absence and Claims Management System which allows you to combine the key ingredients for a successful scheme and manage it simply and effectively on a day to day basis. The system helps alleviate all the main issues so you can concentrate on giving the schools the best value option to cover their absence costs. This system is just part of providing a complete solution to running a successful mutual scheme, and this means ensuring you provide an unbeatable level of cost reimbursement cover at the lowest possible cost to the maximum number of schools on a solid financial and commercial basis using sound statistical and practical principles. The most successful schemes use our “model scheme” template and are “Esphera Certified” – read more here.