A recent green paper has indicated that there is at last official recognisation in Westminster that group income protection has a major role to play in targeting sickness absence and helping people get back to work. But will it be enough to boost take-up among employers? Emily Perryman reports
A recognition by the government that group income protection (GIP) should play a bigger part in tackling sickness absence has been welcomed by the group risk industry, which views employer-based schemes as the logical way of helping to close the UK’s protection gap.
Alongside a proposed review of statutory sick pay (SSP), which could lead to people making “phased” returns to work, the government’s Improving Lives green paper states that GIP policies have a much greater role to play in supporting employers to invest in health and wellbeing.
Group risk insurers and intermediaries firmly believe that the focus on employer-based schemes, as oppose to individual income protection (IP) products, is the right way forward.
“Through GIP, employers can cover large numbers of people in one go cheaply and without worrying about whether someone has a pre-existing condition,” explains John Letizia, head of public affairs & CSR at Unum. “GIP providers are able to work with the employer, the line manager, the employee who is unwell and their clinicians to provide the best return to work support. That is extremely effective.”
Tom Gaynor, employee benefits director at MetLife UK, says the workplace is the most realistic way of getting people covered. He points out that it is where people get their main source of income and argues that it is in the employer’s interests to insure their employees.
The green paper cites analysis by the Centre for Economics and Business Research, which suggests the duration of long-term absences among employees who use early intervention and rehabilitation services is 16.6% shorter than among those who do not.
“The likelihood of a return to work is enhanced when someone has IP and particularly when it is group IP. The insurer can liaise with HR and the individual’s line manager to organise a return to work plan; there is a relationship between the adviser, employer and insurer. It is a more holistic approach to getting a more sustainable return to work,’ Gaynor says.
Steve Thomson, business development manager, health and protection at Stackhouse Poland, believes employers should be playing a greater role in cutting sickness absence because employees are their biggest asset.
“Too many employees are unaware of how little support they will receive, but the foundations are there. The providers, the services and value-add features, not to mention the specialist experts on hand – it all exists. There is this perception that GIP is costly, but things have changed and actually with the right advice and conversations the policies can be tailored to best suit the employer’s needs and budget,” Thomson says.
He argues that the application process in the individual market is onerous and time consuming, whereas GIP benefits from free cover levels which can reduce or even remove the need for medicals. “Equally, group arrangements benefit from competitive pricing and a plethora of features that the individual market is yet to reach. All of these factors make group arrangements less about the insurance safety net (which remains in place) and more about the early intervention and prevention measures. Effectively, group IP is becoming more like an outsourced HR support service for health-related situations,” Thomson adds.
Individual market impact
If the green paper turns into concrete measures that eventually lead to an increase in GIP take-up, it could lead to the individual IP market suffering. Gaynor says it might be a tough environment for individual IP providers because if someone receives benefits through work they would not pay for an individual product as well.
This could result in more insurers pulling out of the individual IP market. Unum stopped selling individual IP products in 2012 because it felt the future was in benefits and IP sold through the workplace, Letizia says.
“Group cover is more affordable and more accessible to people who already have health problems. So we wanted to focus all our efforts on building the group market,” he adds.
Conversely, Paul Avis, marketing director at Canada Life, says it would seriously consider entering the individual IP market if the government stopped taking IP into account when calculating Universal Credit payments, which he argues is a disincentive to buying policies.
He suggests individual and group policies could work alongside each other; for example an employer could provide a two-year payment plan and the individual could extend it with an individual IP product that lasts until pension age.
Jon Blackburn, clinical and rehabilitation services manager at Aviva, adds: “Ultimately, not every employer has the resource, or inclination, to implement group protection, and over 15% of the UK workforce are self-employed (and increasing). There will always be a need for individual IP.”
Policy in practice
Although the government’s focus on GIP is welcome, not everyone in the industry believes this alone will help to increase the take-up of policies. The green paper states that GIP policies have the potential to support employers to retain disabled employees and those with health conditions, yet only 7% to 8% of the working population is covered by such a policy.
Ian Holmes, director at Medical Expenses Consulting, points out that it is just one of hundreds of green papers – preliminary reports that are designed to provoke discussion. Whether it becomes a white paper – a firm set of proposals – remains to be seen.
“My worry is that if a white paper is published GIP will just become a throwaway comment,” he says.
Holmes suggests there needs to be carrot and stick measures, such as the use of tax incentives, to boost take-up. “GIP policies might not be expensive but there is only so much money to go round. In some companies employees haven’t had a pay rise for several years and businesses have also had to deal with pensions auto-enrolment,” he says.
Nick Homer, corporate risk propositions manager at Zurich, suggests providing a rebate of between £30 and £50 per employee through the National Insurance system for employers who offer GIP. “This would signify the government’s endorsement of the product, which would enable insurers and intermediaries to get greater engagement. It is key to getting the message across.”
A key area of focus is how to make GIP attractive to smaller employers. The green paper says coverage is particularly low among SMEs, in part because some insurers do not offer products to very small businesses and also due to the cost and low awareness of the products. It suggests enabling employers to pool resources and buy products as a collective.
Katharine Moxham, spokesperson for trade body Group Risk Development, says this is a completely feasible idea and that the industry does provide these types of solutions already. “This is where the work and dialogue needs to focus,” she says.
“Smaller employers think GIP is more expensive than it is, partly because they don’t understand it’s not just an insurance policy. There are a raft of services employees can use every day; it’s a lot more than just a financial payment,” Moxham adds.
However, several insurers and intermediaries do not think buying GIP as a collective is viable. Homer says GIP is priced based on the specific profile of the employer – for example the industry they operate in and their employees’ occupations.
“The collective route results in a pooling of risk, which means good value for some and poor value for others. For us to deliver good value, it has to happen at the individual employer level,” he says.
Another challenge is to encourage employers to use all the benefits of GIP schemes. The green paper says there needs to be an exploration into why larger employers are not making better use of the products.
Thomson says the reasons are varied: “Some will have complex policies in place and a number of products but no idea where each one fits. Some will have no idea of the value-add features, which is down to the role of the adviser/insurer to proactively engage with businesses. For others, it could just be about capacity within the business – whether that’s headcount, or factors such as remote management which complicates the process. But with a little help, employers can fully use their insurance policies by bringing them together with their internal policies and processes – we just need time and commitment.”
Green paper summary
The paper – Improving Lives: The Work, Health and Disability Green Paper – aims to spark a national debate into how best to support people with a disability or health condition back into the workplace. Figures suggest ill-health among working age people costs the economy £100bn a year, while sickness absence costs employers £9bn a year.
Key measures up for discussion include an overhaul of the Work Capability Assessment (WCA), which is used to decide whether someone is fit for work. Ministers will consult on changing the tests to deliver more personalised support and to end the division of Universal Credit and Employment and Support Allowance (ESA) claimants into groups deemed able or unable to work.
The system of Statutory Sick Pay will be reviewed to enable people to make phased returns to work. Currently, workers are entitled to £88.45 a week in SSP if they are too ill to work for a period up to 28 days. As soon as they return to work the sick pay ends, even if they go back part-time.
The government will consider allowing health professionals other than doctors to issue fit notes to ensure advice and return to work support it provided.
It also aims to provoke a discussion into how the take-up of group income protection can be increased and how access to occupational health can be improved.
The consultation, which is open to anyone with an interest, will run until 17 February 2017.