In an era of increasing litigation, employees can be looking for someone to blame if they develop a medical problem while at work. They may not be willing to wait on lengthy NHS lists to see a specialist, often unable to work in the meantime, or they may be concerned about their income in the future. For an employer facing these problems, a group protection scheme can be invaluable in diffusing this worry and anger, and perhaps help avoid the litigation that can follow.
This is an increasingly important area for white collar employees, where working practices have changed so dramatically in the last decade. Now most of us sit at a terminal for eight hours a day, risking repetitive strain injury (RSI) and as yet unknown problems which might arise from screen radiation. The worry is that we cannot be certain now, at the start of this change, what the future holds. But already the onus is on the employer to make the office a safe environment, even before the potential risks are fully understood.
Mariel Irvine, a partner at a city litigation firm Kennedys, explains: “The best advice for any employer is to follow the Health and Safety at Work regulations, conducting risk assessments, making a proactive appraisal and then guarding against them. In the past the onus has only been on employers to counter risks which they know to exist, but now you have to be up-front and proactive. This is particularly relevant with something like RSI which can easily manifest itself without any pre-existing history in the workplace.”
RSI can follow repeated physical movements that damage tendons, nerves, muscles and other soft body tissues. This isn’t a problem restricted to secretaries and PC operators – professions from meatpacking to violin players are at risk too. But the rise in computer use, and our trendy, flat, light-touch keyboards, which allow high speed typing, make for just the kind of repeated movements that can give rise to injuries of hands, arms and shoulders. If a problem like this is allowed to continue it can even lead to permanent disability with the person unable to perform tasks such as dressing and driving.
So can group private medical insurance (PMI) schemes and group income protection (IP) play a role? Certainly a worker whose health problems are managed properly stands a much better chance of returning to work, regaining an income and continuing a productive career than someone who has no help, ends up on State benefits and finally considers litigation as a way out of poverty. The focus now for all group risk schemes is on the management of sickness, rather than just financial payouts, and this can often provide the best solutions for everyone concerned.
And a new government initiative, with personal adviser pilot schemes, backs up this approach. The New Deal for Disabled People calls for close working between the public and private sector, not only to get disabled people into work but to help others hold on to their jobs despite disability or illness. The employment service wants its personal advisers to learn from insurance claims managers, working with them and then applying these principles to State benefit claims.
But how can group risk insurance help the employer? A group income protection scheme that includes rehabilitation or proportionate benefit will be particularly helpful now the Disability Discrimination Act has been brought in because employers must treat disabled staff fairly.
As Zoe McWilliams, group schemes manager for Permanent, says: “If an employee wishes to return to work then the employer is obliged to find them an appropriate role under the Disability Discrimination Act.
“Where there is a group income protection scheme the employer is not so likely to dismiss an employee who is off work and the cost of keeping that person on the books is greatly reduced as the employer can cover the continuing salary, the NI liability and the pension contributions. There is more incentive for the employer and the employee to agree a gradual return to work and therefore avoid the possible risk of legal action for dismissal.”
Stress related illnesses, the curse of our decade, are also a case in point. Healthcare providers can work together to help companies manage absenteeism and good claims management will keep premiums lower. Unmanaged claims are bad news for everyone, including the claimant who can lose self-worth, as well as a career, when sitting at home leads to isolation and a sense of neglect. Yet this picture can be turned around if the treatment for an illness is identified at the start. Claims visitors are useful listeners, particularly in an era of three minute GP appointments, and finding out exactly what is wrong can provide the link to any useful treatment. There is an increasing tendency for income protection insurers to pay for or share the cost of private treatment if this will provide an early solution and a speedier return to work.
Yet more than 50 per cent of claims are not notified to the insurer until the employee has been off work for at least the waiting period, even though the employer is paying for professional disability managers and should be using them.
The financial adviser also has a role to play here, helping to manage claims by showing the employer the relationship between claims and premium increases.
But most of these arguments are as true for corporate PMI as they are for IP, and where an employer runs both schemes, the providers, the company, and the adviser can all work together to manage claims at an early stage. When setting up a scheme an intermediary should bear this in mind because communication between all parties, including the adviser, is paramount. Most PMI schemes for the major corporates are currently broked by specialist intermediaries and it is often the bespoke healthcare products that are recommended. Using a third party administrator to make it all run smoothly is also very fashionable.
Chris Moore, marketing manager for Medisure, one of the market leaders of third party administration (TPA) believes this is the future for large corporates.
“The beauty of TPA is that the front end, which is all the employee sees, stays consistent, we even answer the telephone with the clients’ name, while behind the scenes we can unbolt the underwriter and bolt in another one if we need. Or we can change the funding vehicle, alter whether it’s insured or not or even whether the scheme is a trust or run offshore without ever affecting anything the member sees.”
Medisure tends to work alongside intermediaries, offering consultancy expertise, whether that be to reduce healthcare costs or to help with absenteeism.
“We don’t have to be constrained within the parameters of conventional PMI,” explains Moore. “We can go a lot further under the surface, looking at preventative reasons, checking why healthcare expenditure maybe high and build a benefits package and service standards to meet an employer’s particular needs. In doing that we may or may not include insurance in the traditional way.”
But TPA has an additional advantage: “The way we structure the schemes we can often reduce things like insurance premium tax,” says Moore, “or the risk charge that an insurer has to put on a scheme, especially if we go down the route of setting up a medical benefits trust.”
Using a trust to minimise insurance premium tax liability has become increasingly important since Gordon Brown raised the tax from four per cent to five per cent this July, and from next April employers will also have to pay national insurance on their group PMI premiums. Since a trust does not pay premiums to an insurer it avoids the tax, but most employers lack the administrative expertise to run such a scheme so it makes sense to use a third party administrator.
But simply taking out group risk insurance does not finalise the responsibilities of the employer. Supposing an employee has a specific medical condition which limits benefit to the free cover amount of the company’s group income protection scheme, yet the employment contract promises 75 per cent of salary as sick pay, this will leave a shortfall and the employer will be liable.
So employers have to understand the difference between the cover they arrange through a group risk plan and the actual obligations written into any contract of employment, because if these two do not overlap exactly there could still be litigation problems on the horizon.
And no one in the workplace will really benefit from that.