The government has called on the protection industry to improve product design in order to boost take-up of group income protection (GIP).
In the Improving Lives: The Future of Work, Health and Disability report, published on Thursday (30 November), it urged providers to develop GIP insurance products that better meet the needs of smaller businesses.
The report claims many small and medium-sized enterprises (SMEs) do not offer sick pay for periods beyond statutory requirements but lack incentives to invest in GIP.
It calls on providers to develop a product that retains the established benefits of GIP but overcomes the barriers to wider take-up, including factors such as complexity, perceptions of cost and benefit.
The government hopes to boost GIP as a means of encouraging more disabled people into work, having made a manifesto commitment to ensure one million more disabled people are employed over the next ten years.
The report also sets out plans to encourage employers to improve their support for workers with mental health conditions and reform the fit for work certificate – or fit note – to encourage people back to work and involve other health professionals beyond GPs in the certification process.
Elliot Silk, head of commercial at Sanlam UK, said: "The issue for SMEs is once an employee goes sick it means that employee is staying on the payroll, and it is more difficult to remove them from the workplace.
"It is quite difficult to replace that person, which puts pressure on the other members of the team."
Mr Silk said insurers could possibly get around this by allowing a direct pay facility rather than going through the company payroll.
But he added: "It is potentially easier for them dealing with an employer rather than an individual. Once they pay directly, the employer is not necessarily encouraging them back to work."
Zurich welcomed the government’s focus on GIP as a means of helping firms to support their employees but raised concerns about the issue of product design.
Nick Homer, Zurich's head of market management, corporate risk, said: “We are concerned that the government believes that the main challenge to increasing the take-up of GIP is one of product design, as it is a flexible product that can be tailored to meet the needs and budgets of SMEs through to multi-national organisations. The challenges are much broader environmental issues.
"We strongly believe that the government must work in partnership with the private sector to create an environment that incentivises employers to take action to protect their employees, and we look forward to engaging with them further on this important issue."
These concerns were echoed by Nadeem Farid, employee benefits consultant at Drewberry, who said the biggest barrier to take-up of GIP was public knowledge and perception of the product.
He added that many employers approached the firm looking for critical illness cover but preferred group income protection once they realised what the product involved.
Mr Farid said: "The issue is that they don't know it's out there in the first place and also they feel cover must be expensive. However, we're seeing very competitive pricing from some players in the group risk market at the moment, making cover more affordable for SMEs in particular."
Raluca Boroianu-Omura, assistant director, head of protection and health, Association of British Insurers, said: “GIP is an affordable product which can help all employers create positive workplaces, with the emphasis on preventing ill health and, when this does occur, reacting promptly to support employees and businesses.
“To expand further the crucial safety net GIP offers, we have proposed measures to increase awareness and support greater take-up. We would like to see a tax incentive for employers who purchase GIP for their staff.
“We have also proposed creating annual protection statements which employers should issue to their employees to make them aware of their combined sick pay and benefit entitlement if absent from work due to health reasons.
“The government welcomed its engagement with the insurance industry on this important issue, and we will continue to work with them on our shared goal of improving workplace health.”
John Letizia, head of public affairs and corporate social responsibility at group protection provider Unum, welcomed the report’s focus on improving the fit note process and taking up the recommendations of the prime minister’s review into mental health at work.
He added: “There are a number of steps the government can take to encourage more employers, especially smaller ones, to invest in group income protection that would help transform the working lives of people with health problems, boost the economy and benefit taxpayers. I urge the government to take these proposals forward.”
simon.allin@ft.com
