Income Protection  

Corporate clients can bridge protection gap

This article is part of
Guide to income protection

In the 88-page green paper issued by the Department for Work & Pensions and the Department of Health in November 2016, it claimed uptake of group income protection was "very low", as only 7 per cent to 8 per cent of the working population has been covered by such a policy.

This was particularly problematic among smaller companies.

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The document stated: "Coverage is particularly low among small and medium-sized employers; in part, this might be because some insurance providers do not offer products to very small businesses."

Accordingly, the government called on insurance providers to "develop GIP products that are affordable for, and tailored to meet the needs of, smaller employers, including micro-businesses, and for them to raise awareness and make access to such products easier".

If more corporate clients included this as part of the employee benefits package, they may not have to suffer the longer-term business effects of having to replace staff who have had to leave due to ill-health.

This is a serious concern. The Association of British Insurers (ABI) recently revealed high levels of work-related absence, and only small numbers of people being able to return to work across the UK.

Even those employers who do have some form of insurance that offers rehabilitation and return to work services do not do enough to promote this.

Nick Homer, group protection manager of corporate propositions for Zurich, provides these tips for advisers with corporate clients considering income protection.

  • Ideally implement a group income protection arrangement, particularly because this gives some employees access to cover that they wouldn't otherwise be able to obtain personally.
  • Clarify and communicate their sick pay provision, so that employees have a clear sight of their personal income protection gap / private provision needs.
  • Promote financial well-being and highlight the importance of protection during your working life as well as retirement planning.

According to Martin Noone, managing director for workplace health and protection at Legal & General, communicating these benefits to staff is vital.

He says: "Our recent workplace wellbeing research found more than 50 per cent of employees surveyed had either themselves or knew someone who had been off work with a long-term absence in the past 12 months.

"This, coupled with 49 per cent saying they would only last two weeks or less before having to make cutbacks if their salary were replaced by the statutory sick pay, shows the extent of the problem and the need for income protection."

Add-ons

This is why corporate clients may find the supporting services attached to many group income protection policies extremely useful for retaining key staff and getting them back to work as soon as possible.

Such programmes have already been proven to work.

According to the Association of British Insurer's 2014 report: Welfare Reform for the 21st Century, companies with proper employee support programmes have seen benefits for both the employer and the employee.

The report stated: "Among insurers offering such intervention in the US, it was found to be 43 per cent more effective than non-intervention.

"A more recent two-year trial by the Royal Mail led to three-quarters of those off work returning to work, with a rate of return of £5 for every £1 invested."