Workplace Protection Shake Up

In November 2016, the government launched a joint Department of Work and Pensions (DWP) and Department of Health (DoH) green paper focusing on group/worksite income protection. In it, the government states it aims for group (or workplace) income protection insurance policies to play a greater role in supporting employers as it endeavours to keep people engaged with the workplace and improve physical, mental and financial health and resilience.

There’s been much media coverage of the protection gap, and the fact that the government acknowledges the problem and is looking for solutions is to be welcomed.

What are the issues?
One in four people experience mental health problems at some point in their life and 280,000 diagnosed with cancer each year, of whom half live a further 10 years or more. And with research by Scottish Widows showing only 1in 10 people in the UK have critical illness cover, and only one-third have life cover; this leaves an alarming number of families vulnerable to a real financial struggle in the event of losing an income through illness or disability. Changes to state benefits are exacerbating the potential problem – for example the move to convert the Support for Mortgage Interest Benefit into a loan (or charge against the property) and caps on Universal Credit mean many risk losing their home or lifestyle in the event of serious health problems.

What are the benefits of group income protection?
Many group income protection (GIP) schemes offer rehabilitation and absence management support for both employers and staff facing absence. This works because there is a mutual interest in getting the member of staff back into work as quickly and smoothly as possible. For the employer they get an back a productive member of staff whose absence may have been not only inconvenient but also costly, especially where agency or replacement personnel have had to be employed. For the insurance provider, returning to work means no longer paying out benefits. GIP provider Unum’s Return to Work rehabilitation service was used by nearly 1,500 people in 2015 and the outcome statistics make for interesting reading:

  • 7 out of 10 people with serious health problems were supported back

  • Mental health (41%), musculoskeletal problems (19%) and cancer (9%) were the most common health conditions faced by those successfully returning to work

  • Over 1/3 of people returning to work were under 40

  • Women are more likely to use rehabilitation services – making up 40% of people covered but half of those returning to work

What might the future hold?
Scottish Widows hope that the consultation will kickstart a more collaborative financial protection industry, which rewards households for taking appropriate steps towards financial resilience. Unum goes further and calls for bold action in the form of a temporary tax break for employers offering GIP cover. They’re suggesting National Insurance is reduced by £30 per employee covered – which equates to approximately10-20% of the cost of a typical GIP policy. As for Aspira, we’re pleased that the topic is getting a little more press coverage, and we hope the government will find a way of working with insurance providers and advisers to encourage households to take out this much needed insurance, whether by reducing its cost, tax breaks for employer provision or by innovations in product design.  We’ll keep you up to date with developments in this area, but in the meantime if you’d like to discuss your own protection needs, or if you’re an employer and you’d like to find out about providing corporate cover, do get in touch.

‘A game changer? The work, health and disability green paper’, Johnny Timpson, Scottish Widows techtalk magazine, January 2017

‘Unum calls for government to introduce temporary tax break for employers that buy Group Income Protection to help more people with health problems to stay in work’, Unum Press Release, 14 February 2017
‘7 in 10 people return to work with Unum’s rehab service’, Unum Press Release, 12 April 2016

‘Unum calls for temporary tax break for group income protection’, Health Insurance Daily magazine, 15 February 2017

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