Now is the time for government to think seriously about tax incentivisation for workplace income protection, according to the Association of British Insurers’s director James Dalton.
In a speech today (27 October), he said: “It’s never a popular argument with government, but that just means that as an industry we need to work harder to make the economic and social case.”
Mr Dalton argued that the chancellor should be made aware of long-term savings that can be made through the increased uptake of income protection, including increased taxation revenue, decreased welfare spending and less pressure on the limited resources of the NHS.
“The introduction of pension auto-enrolment means that, for the first time, many SMEs are discussing the types of benefits packages they want to offer their employees in the future. Making it cheaper and easier for companies to offer group IP is crucial to increasing uptake.”
Mr Dalton added that the industry has already been constructively engaging with the government to debate the issues, provide the evidence and make the case.
However, despite the benefits of income protection products to help people get back to work more quickly through the use of rehabilitation, or through financial support if a return to work is not possible, the uptake of these products in the UK by individuals and businesses remains low by international standards.
“As an industry, we need to get better at communicating the benefits of IP to business... and we need to work with government to make sure that any disincentives to the uptake of IP are removed at the same time as making sure the right ‘nudges’ are in place to ensure the greatest number of people can benefit from the services our industry provides.”
In February this year, the ABI told FTAdviser it was lobbying for legislative changes to the way welfare is delivered to boost the provision of income protection through the workplace, as efforts continue to halt a slide in sales of what is seen as a critical financial planning product.
At that time, the ABI’s head of protection Helen White said it was looking for “some kind of legislative action from the next government or a future government that will lead to reforms in the welfare system and will make greater use of income protection insurance through the workplace part of that solution”.
In October 2014, the ABI joined calls for compulsory employer-led insurance schemes to help to bridge the protection gap.
ruth.gillbe@ft.com
