For those schemes who have decided to target insurance and buy-out, there is often a daunting amount of work in front of them.

The need to fill gaps in data and produce a benefit specification, fit a transaction into an already busy job and then transfer the administration to an insurer feels like a lot.  And to be frank, it is, especially for smaller schemes.

So with all big tasks, it is best to break it down into more manageable chunks. The journey from today to wind-up can be broken into three key phases:

A – preparation

B – transaction

C – complete wind-up

But it would be a mistake to treat them all independently. Indeed, it is the co-ordination of these three phases which is where I think smaller schemes can really access additional value and ensure the journey all the way to ‘wind-up’ is as seamless and efficient as possible.

Preparation – focus on the right areas in the current admin capacity crunch

I’ve been advising schemes on buy-in and buy-outs for the last 12 years and it has always been important to do the right preparation to access the best pricing and avoid surprises later in the process.

This is more true than ever in the busy market. Insurers are having to be more selective about the buy-ins they quote on and so smaller schemes in particular need to prepare properly and thoroughly. The key challenge in the current environment is one of resource – there are lots of schemes looking to undertake data cleansing in readiness for a transaction and complete GMP equalisation alongside it.

So for smaller schemes it is about focusing on the right areas and starting the preparation work early. Undertaking a ‘data readiness’ assessment now, even where insurance is two or more years away, allows schemes to draw up their ‘to do’ lists and then prioritise each task. Putting in place a plan, with dedicated data preparation resource, also means the ongoing BAU service to members is not impacted.

My colleague Ruth put together a really helpful guide to “beat the triage” which includes lots of tips of how best to prepare and where to focus your time.  Whilst data does not need to be perfect, there are some “must haves” and “nice to haves” which will help schemes access the best pricing possible and make the overall journey to wind-up smoother.

Transaction – streamline your process to access better terms and pricing 

Even in today’s very busy buy-in market smaller schemes can still access competitive pricing from multiple insurers if they prepare properly and run the right process.

Whilst there is no “one size fits all” solution to buy-in transactions, there are tried and tested processes that insurers will engage best with. Our market-leading LCP streamlined service for smaller schemes instils a high degree of confidence with insurers in a scheme’s ability to transact efficiently.  This in turn means insurers are more likely to quote and put forward competitive pricing.

Properly prepared schemes that are flexible in their approach and timing can still expect to receive competitive pricing from multiple insurers. Joining up the preparation phase with the transaction phase helps schemes focus on the right tasks ahead of approaching the market and have a clear plan on how to tackle final tasks post transaction. It also gives insurers confidence that the resource intensive wind-up phase will be well planned and executed, including the post transaction data cleanse.  From experience, this often takes longer than schemes expect as issues arise which weren’t always planned for.

Complete wind-up – there is still a job to be done

It certainly isn’t job done once you’ve completed the buy-in transaction with lots of work left to do before schemes can move to buy-out and wind-up. The key to a successful final stage is the preparation work done at outset and the foundations laid during the transaction.  It is also crucial to have a specialist wind-up adviser involved in projects from the outset to help you avoid common pitfalls, find pragmatic solutions to any challenges and make sure nothing falls through the cracks.

In the very busy market, insurers’ administration and operations teams are increasingly busy with the real heavy lifting at the point schemes move to buy-out.  Planning this stage early, including identifying and planning the wind-up tasks as part of the preparation phase and agreeing timelines with insurers ahead of transacting will help ensure it is a smooth final step, particularly for members, with no surprises for all parties.

For example, having a plan for the data cleanse, solutions to the often trickier elements of wind-up such as historical annuities and AVCs and a clear communications plan help this final phase run efficiently. 

Final thoughts

Undertaking a full transaction and winding-up a scheme is a big project. Crucially it is also the final chance to make sure the right benefits are insured for your members.  Joining up the three main phases of the journey will help schemes save time and money and make the member experience smoother too – a win, win for all involved.