Legal and General has become the latest major life insurer to back calls for auto-enrolment style reforms to push people into taking out personal protection, after the Association of British Insurer’s head of protection demanded the government set out the limits of state protection.
John Pollock, chief executive of Legal and General Assurance Society, said: “By implementing ‘auto-enrolment’ type systems for protection cover and long-term care, we could help to ensure that thousands of people across the UK are getting the financial support they need should something happen to a key bill payer in their household.
“Compulsory cover is already in place in the motor insurance industry, and auto-enrolment for pensions has been a great success so far with around a 92 per cent participation rate. We see no reason why this cannot be mirrored for protection products.”
The comments came on the day the ABI’s Helen White published a blog post calling on the government to make clear the limitations of state protection and highlighting the need for better self-provision to offset the pressure for further cuts to the welfare bill.
She writes: “The fact is that welfare only protects the sick and disabled from absolute poverty. For most, it does not provide real financial security. Politicians should be clearer about how much the state will support you and your family.
“Currently the state saves £120m a year from the 11 per cent of working families who have taken out private insurance as a safety net, or whose employer provides it for them.
“If the 60 per cent of households who would not get adequate support from the state all had the same, the Treasury would save a total of over £660m, and those households would be better protected against the unexpected loss of income.”
Ms White’s missive follows on from a report published by the ABI last month, which included proposals for two models put forward by the Centre for Economic and Social Inclusion to build income protection into the workplace in a similar fashion to auto-enrolment for pensions.
Earlier this year Canada Life said that auto-enrolment for income protection would be the single biggest thing to get most people in Britain within some form of protection product.
The topic is becoming far more relevant due to the welfare reforms, which will see contributory employment support allowance claimed for only one year.
Latest research for the ABI by Cesi shows that 10.8m households – more than 60 per cent of working families – would see income fall by around a third and would need more than the state currently provides if critical illness or disability struck down the main breadwinner.
Mr Pollock added: “The current cost of welfare to the state is staggering, and ultimately unsustainable. Ensuring a greater number of families and individuals have adequate protection insurance is one way in which, as an industry, we can help to reduce this burden.”
emma.hughes@ft.com, ashley.wassall@ft.com
