Despite being among the best in the world, Britain’s sickness absence figures still make grim reading. Every year, health and safety failures in the workplace cost businesses £18m – the equivalent of 25m working days.
In an attempt to address this situation, the Health and Safety Commission has published ambitious targets for 2010. Over the next 10 years, ministers have demanded a 30 per cent reduction in working days lost through illness or injury and have announced support and sanctions to ensure employers meet this.
This move has attracted the interest of the group risk insurance market as it adds weight to the rehabilitation slant of many products – which, according to some providers, makes group risk the perfect addition to any occupational health strategy.
Group risk’s focus on rehabilitation is indicative of the welfare culture changes under New Labour, according to Permanent Insurance sales and marketing manager Rod Macdonald. He says: “As far as benefits go, the government has never provided much and will provide even less in the future, so group risk can certainly play a part in this context of self-provision. The government has tried to change the national emphasis from welfare to working – and group risk’s focus on rehabilitation shows we are in tune with this wider welfare picture.”
The group risk product with the strongest claim to an occupational health role is clearly group income protection (IP), which pays a replacement salary if someone is unable to do their job. But worsening claims experience over recent years has prompted providers to focus on helping people back to work rather than leaving them to fall into a ‘disabled’ mindset.
Rehabilitation allows insurers to offer more than the traditional insurance remit, according to Swiss Life employee benefits marketing consultant Nicola Smith. “Being unable to work is not just a financial problem, it can also affect people’s dignity and entire well-being,” she says. “Helping them return to their job can break this cycle.”
Industry insiders insist that early intervention is the key to rehabilitation. Evidence shows there is only a 50 per cent chance of someone ever returning to work if they been away for more than six months.
Many providers ask employers to let them know about potential claims after six to eight weeks of absence rather than the typical 26-week IP deferred period. Such early notice allows them to identify the most appropriate way of getting someone back to work – be it retraining, private medical care or counselling.
To facilitate the process, insurers often draw on the expertise of external organisations for such sophisticated treatment, which is unlikely to be available through the NHS. Legal & General director of group risk Jane Dale says that for people with back problems, for example, there are specialist back schools that can help them manage the pain in a way that could enable them to go back to work.
Proportionate benefits are also used as part of successful IP rehabilitation strategies. Here the insurer pays the scheme member reduced benefits if they return to work in a less well-paid or part-time position. “Effectively, the insurer is subsidising the employee’s pay,” explains GE Frankona Re marketing analyst Peter Fenner.
This flexibility, which encourages someone to return to work even if it might not be to their original position, is not available from the state’s incapacity benefit, which pays out on an all-or-nothing basis. The claimant is regarded as either too ill to work or capable of doing their own job.
Group IP providers also have the expertise to help employers deal with, and prevent, longer-term sickness absence, which is a world away from the typical management issue of an awkward employee who suffers from ‘headache’ Fridays and ‘stomach-ache’ Mondays. “The rehabilitation side of group IP isn’t just about getting people off a claim, it’s about getting them back to work,” says Royal & SunAlliance head of corporate IFA market Peter Anderson. “If we can sit down at an early stage of the proceedings and put the situation in context for everybody, it can prevent claims drifting on for months without any resolution in sight. The better employers manage short-term absence, the less likely it is to become a long-term disability claim.”
Although not so obviously linked to rehabilitation as group IP, group critical illness (CI) can also make an important contribution to someone’s efforts to return to employment. “The lump sum people receive from a CI claim can remove monetary worries and provide a financial cushion that allows someone to focus on returning to health and work,” says Smith. “It can help pay for necessary adaptations in the home, a rehabilitative holiday or even private medical treatment if that person has no other access to it – all of which will stop people going into the downward spiral that often accompanies long-term illness.”
When considering group risk products, most people would include group IP, group CI and group life, but Bupa Health Assurance managing director Geoff Brown says he also adds in group private medical insurance (PMI) – which he considers particularly relevant to the issue of rehabilitation.
“If you look at sickness absence figures,” he says, “it’s clear that short-term sickness, which represents most of the £18m lost every year, often leads to much longer absences if dealt with poorly. We’re being asked more and more for an integrated occupational health strategy that combines group PMI with group IP. If you correct a condition within the 26-week IP deferred period through private sector medical treatment, you can prevent it getting to IP claim stage, which benefits employer, employee and insurer.”
Fenner also believes group PMI can play a vital role in absence management and quick, effective rehabilitation. “Staff with access to PMI cover not only have access to fast treatment when they need it but also to health screening programmes that can pick up problems early and result in swift action that avoids the later need for a lengthy spell off work,” he says.
This desire for integrated, flexible employee benefits has certainly not gone unnoticed by the group risk market, which already has one eye cast in the direction of the impending arrival of stakeholder pensions. The industry feeling is that, as stakeholder requires companies to provide staff with access to a pension, the changing environment with regard to state support and employee expectations may persuade them to introduce further benefits – and with its obvious rehabilitative advantages, what could be more appropriate than group risk?
Scottish Equitable Employee Benefits development manager Sue Sneddon says that, in response to a recent survey, 88 per cent of employers said they do not understand their obligations with regard to stakeholder (last year, it was only 63 per cent). “With this much uncertainty, IFAs will have a vital advisory role to play in the development of stakeholder,” she says. “And it’s clear, the way things are going, that they may well have the opportunity to advise on group risk at the same time.”
Sneddon adds that the two markets should develop in tandem and believes there is even a “legislative driver” within stakeholder for companies to introduce group risk. “There is a group life option within stakeholder but you can only buy cover worth 10 per cent of the pension contribution, which isn’t a particularly great package,” she says. “So there’s definitely a good reason for IFAs to talk to companies about a separate group life scheme at least, and with all the other issues employers have to face, absence management foremost among them, why not group IP and group CI as well?”
Proposed legislative changes to what is taken into account when calculating state benefits might also persuade employers to introduce a group risk scheme, according to Swiss Re Life & Health group risk manager Ken Richart. He says that, from April, if the employer/employee relationship no longer exists – if someone has been retired on ill health grounds for example, which often happens with long-term illness or injury – employer contributions will affect state benefits. If the relationship still exists, as it does under a group IP scheme, they won’t.
“This is an obvious incentive for employees to join the group IP scheme and for companies to offer risk benefits,” adds Richart. “If the link is broken, as with retirement, there is no possibility of that person returning to work. If the link is still in place – with group IP, the claimant is still on the company payroll – there is still some chance of rehabilitation and return.”
So the future for group risk is certain to be full of opportunity: it looks set to serve as a natural foil for stakeholder and has a strong rehabilitation element just as the importance of such initiatives is becoming clear. The next few years could well see more and more organisations turning to group risk policies in an attempt to control sickness absence – if only to avoid the wrath of the government for not meeting its all-important targets.