The launch of Unum’s Associated Business Cost cover is just one sign that insurers anticipate increased demand from employers for group risk policies that cap their liability for holiday pay accrued by absent employees.
Since last year’s ruling by the European Court of Justice (ECJ) that employees on sick leave are entitled to claim pay in lieu of the annual leave accrued during sickness absence, insurers, employers and advisers have all expressed concern about the impact this may have on group risk schemes. The issue is complicated by the fact that the government has yet to issue clear guidance on what the ruling means for UK employers.
Unum’s Associated Business Cost cover brings together cover for many of the costs associated with an employee being off sick long-term, including employer pension and National Insurance contributions, premiums for other benefits such as group life cover and private medical insurance (PMI) and the expense of providing a company car or mobile. Holiday pay can also be covered.
“Unum have combined a few things, making it clear to the employer that when an employee is off sick they have other requirements,” said Mike Blake, compliance director at national specialist intermediary PMI Health. “It’s quite a shrewd move.”
Hélène Gullen, commercial marketing manager at Unum, said the ECJ ruling had led to an increase in queries from clients.
“In the past we have, on a very scant basis, covered PMI premiums for employers and group life premiums, but we might have half a dozen such policies,” she said. “With the changes coming in holiday pay and the right to accrue that, we’ve had many more questions from employers about covering that liability. Originally we were just going to cover holiday pay, then we thought we would think more broadly about this to help employers when someone goes off sick. Associated Business Cost cover is not there to increase benefits for employees, as in most cases we like there to be some financial incentive for them to return to work, but as long as these benefits are for the employer we are happy to cover whatever they want us to cover, in essence.”
While Unum formally launched Associated Business Cover on 1st June, other providers suggested that the principle of covering other liabilities had been established in the market for years. Many will cover pension and national insurance contributions as standard.
Paul Avis, director of sales and marketing at Canada Life, said that employers required education about “the need to cover their liabilities in these core, expensive areas which can add significantly to the wage bill”.
“It’s not very new,” said Bob Cheesewright, group risk proposition director at Zurich of the Unum offering. “It’s long-established good practice in this sector. If you look at the classic income protection [IP] scheme, you have a benefit paid to the individual and to the employer. You can use the benefit paid to the employer for all sorts of things, like paying agency fees if you need to replace someone. Unum is getting brokers to appreciate what is available but it is not unique.”
Katherine Baxter, product manager at Bupa, said it had been a standard feature for years that Bupa would pay the PMI premium for a group income protection claimant provided that both benefits were provided by Bupa. Baxter, Cheesewright, Aviva’s Steve Bridger and Friends Provident’s Declan White all confirmed that they are able to cover the holiday pay liability on request from clients on an ad-hoc basis.
“We want to respond to the long-term needs of customers,” said Bridger, head of group risk at Aviva UK Health. “But our biggest concern is that we don’t feel yet that legal decisions have set out the actual insurance requirements on holiday pay. Until there are more court rulings there will not be consensus or clarity. It’s very clear that it does bother customers so if we can agree on what they need and what bothers them, we will base our offering around that. It could be fairly significant.”
Friends Provident’s White said the insurer had already covered some clients for holiday pay but warned that additional benefits would push up the cost of a policy, which he suggested few employers would be keen to do in the current climate.
“At the moment, holiday pay is not covered in the contract generally on group IP schemes,” said PMI’s Blake, who is advising clients to have discussions to with their employment lawyers. “This contract reflects the employee / employer contract and most of those have not been updated [since the ruling].”
PROVIDERS SPLIT ON EMPLOYER ATTITUDES TO EAPs
While Associated Business Cost is focused very much on employers, providers remain split on the value of another oft-promoted benefit, employee assistance programmes (EAPs).
“When we launched the company we did market research and the advice we were given is that if something is given away free then it is probably not worth much,” said Zurich’s Cheesewright, who argued that it was better to establish a “real” EAP, with a wide range of services, tailored to the organisation, which could reduce the risk of employees being absent the first place.
However, White said that Friends Provident was definitely looking at adding an EAP to its offering while Gullen stressed the value of employer EAPs in terms of providing legal advice on issues such as holiday pay. For Aviva’s Bridges, the GP, stress and bereavement helplines all play a role in his company’s offering but the real value lies elsewhere.
“Our core offering is our claims approach,” he said. “Our new claims team are all trained counsellors which can offer stronger support than a form. It’s the service offering, rather than add-ons, which is more beneficial.”