ProtectionJan 12 2015

Protection campaigners pledge to continue policy push

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Protection campaigners pledge to continue policy push

Income protection providers have reacted to comments made by the pensions minister last week which appeared dismissive of subsidising protection cover through companies, arguing that private provision is typically superior to the more limited protection offered by state benefits.

Speaking at a Zurich conference on 8 January, Steve Webb stated he was “open-minded but sceptical” about the government subsidising businesses to provide income protection at work, pointing out that only the most ‘paternalistic’ companies would be interested in providing free cover.

Mr Webb added the benefits of group income protection were unlikely to be spread to those most in need - those in fragmented employment or on zero hours contracts - and asked whether prevention might be better than restitution, with money better spent on making sure people are off sick less in the first place.

His comments came as a number of companies and, in a report in October, the Association of British Insurers, back calls for the government to step in to legislative an auto-enrolment-style system to boost take up of protection.

Peter Le Beau, chairman of the Income Protection Task Force, said that while underwriting can be selective for the minority who apply for protection insurance, the definitions used for private income protection are typically considerably better than those generally applied for state benefits.

He added that “with over 90 per cent of all claims being paid in the UK we believe the debate with government in this regard should continue”.

Mr Le Beau continued that it is important to provide a private sector alternative which can lift a wider burden from the state as well, as playing a role in helping people to get back to work.

“The direction auto-enrolment and overall pensions reform are taking is signposted towards greater self-sufficiency in terms of a realistic conclusion that the state cannot be solely relied on in terms of retirement provision; presumably the same principle could apply to protection insurance.”

Mark Myers, chief executive at British Friendly, told FTAdviser flagged up that state benefits are increasingly difficult to claim and only provide the bare minimum to survive.

“The point is not whether employers will touch hard working people with no financial safety margin ‘with a bargepole’ but to make them aware that they can buy this type of protection themselves and not just survive but maintain their lifestyle if they aren’t able to work anymore.”

Tom Conner, director at Drewberry Insurance, argued: “Many insurers do offer rehabilitation as part of their insurance products so the client does get much more than just a payout and, unlike with the state, they don’t have to fill out huge numbers of forms to claim.”

Mark Dennison, principal at LightBlue UK, added that claiming benefits is more difficult than ever and less likely to pay out.

peter.walker@ft.com