Zurich boss calls on MPs to meet protection industry

Gary Shaughnessy, chief executive for Europe, the Middle East and Asia at Zurich, said the development of modern, flexible protection benefits and wellness support services globally has not kept pace with the development of modern, flexible workforces.

As a result, Mr Shaughnessy has warned unless there is more support at every level for the individual, the employer, the innovative insurer and healthcare providers, more and more people will end up falling back on an ever-burdened and cash-strapped welfare state.

Mr Shaughnessy told FTAdviser: "There needs to be a partnership between government and employers, providers, advisers and consumers.

"There is still too large a part of the UK population without enough assets to rely on in the event of the breadwinner being ill or in an accident and unable to work.

"If you add to this number the growing amount of Britons working in the so-called gig economy, where they haven't access to benefits or savings or any workplace protection at all, the situation could be even worse."

According to Mr Shaughnessy, there are so many different solutions to the protection gap being discussed, such as education or more innovation among insurers, but these are "just single actions", he said.

"What we need instead of a single action is a holistic and coherent action that considers the different needs of all employees, from full-timers to those in flexible working."

If we can create the right environment for employers and employees to seek advice, this will make the advice process itself much easier. Gary Shaughnessy

He pointed to recent research by Zurich, Embracing the income protection gaps challenge: options and solutions, which was carried out in association with Oxford University.

The study looked at 12 countries, from the UK to Hong Kong and to Brazil. It found those countries with a stronger welfare state had a far lower take-up of income protection.

All countries were experiencing a demographic trend of rising population growth, higher numbers of older people in work, and higher numbers of workers with age-related and other health problems.

Some countries have been attempting to bridge the savings and protection gap by making pensions and protection compulsory for employers to offer and employees to take up.

In Australia, for the past 27 years or so, there has been a mandatory superannuation scheme, forcing employees to make some level of defined contribution provision for their retirement.

Alongside this scheme, members are provided with default cover against the risks of total and permanent disablement and premature death, and also receive a form of limited income protection, known as salary continuance. 

This operates on an opt-out basis, although this is under review. 

Mr Shaughnessy said adopting a similar model might help the UK's largely under-protected workforce.

However, even if the government did bring in a form of auto-enrolment for insurance, which could be linked to pensions auto-enrolment in the workplace or attached as a benefit with a form of fiscal incentive, such as a reduction in the employer's national insurance contributions, this would still only be "just one measure".

He explained: "There must be a combination of government-endorsed education, auto-enrolment incentives and more innovation of products and services from the insurance industry.

"But this is not enough. Auto-enrolment on its own is not the right answer: it needs to be accompanied by the sort of education that supports wellness programmes through which individuals can help improve their own health."

By avoiding thinking about potential illnesses and injuries, we waste the opportunity to prepare. Robert Harvey

Moreover, while all employers in the UK are required by law to provide a workplace pension for their staff, following the introduction of the auto-enrolment regime in 2012, not all employers are required to offer group income protection or critical illness cover.

Figures from the Office for National Statistics (ONS) estimate the total number of people in the workforce at 30 million. Yet according to statistics from protection adviser Drewberry, only 3 million people have some form of income protection - just one-tenth of the workplace.

The Drewberry research also revealed one in five people had "no idea" how they would cope financially if they were to suffer from long-term incapacity.

According to the ONS, some 4.8 million people are registered as self employed or working in the gig economy, currently with little to no pension or protection provision. 

However, according to statistics from insurer LV, only 4 per cent of the self-employed population have some form of protection against accident or serious illness.  

Association of British Insurers' statistics have estimated that 1m UK workers a year find themselves unable to work due to a serious illness or injury.

Robert Harvey, independent protection expert at Drewberry, commented: "It’s human nature to avoid thinking about bad things that might happen in the future. We adopt an ‘it won’t happen to me’ mindset.

"However, by avoiding thinking about potential illnesses and injuries, we waste the opportunity to prepare and minimise the effects of these misfortunes."

Advisers, too, have a role to play in helping people get the right insurance policy.

"The financial advisory community has always made a huge difference, so if we can create the right environment for employers and employees to seek advice, this will make the advice process itself much easier", Mr Shaughnessy added.

"Rather than the adviser trying to convince people that protection is something they should be considering, people will already be aware of the need, and so the adviser can instead focus on what would work best for the client."

simoney.kyriakou@ft.com