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A Better Plan for Welfare?

Helen White ABI Helen White, Head of Protection and Health

Insurers already help workers during illness or injury; there is potential for them to play a greater role in providing rehabilitation to support them back into the workplace.

For the Conservatives, this is ‘Welfare Week’, for Labour it is about ‘A Better Plan for Britain’s Prosperity’.

The Conservative Party are hailing Iain Duncan Smith’s roll-out of Universal Credit as a triumph in delivering their ‘British deal in welfare’, in order to ‘make work pay’, to get people back into work and cut the cost of benefits.

Meanwhile, Labour have been promoting their ‘jobs guarantee’, using the welfare state as a springboard for helping people with skills into well paid jobs and emphasising employer-led training, in order for individuals to improve and progress, but with better safety nets for hard times and ill health.

In this debate, both the main parties are agreeing on a key point: an emphasis on getting and keeping people in work and the need for greater personal and employer responsibility in welfare.

The role of insurers

The welfare state should exist to protect and support those who need it most, those who are sick and disabled. However, in the world of work, there is an argument that the welfare state should act as a springboard back into work, not just a safety-net for those out for work. In the UK, 1 million workers each year suddenly find themselves unable to work due to serious illness or injury and become dependent on welfare for an income. Insurers can play a greater role in giving people a more adequate safety net and helping them return to their jobs faster.

For many who need to stop work due to an illness or accident, the state provision can be shockingly low. More than 60% UK working families (10.8 million) would be entitled to little or no state support if the principal earner had to stop work, leaving them to rely on savings and the salary of the second earner. As Huw Evans, Director General of the ABI, discussed in a recent blog, there is a role for partnerships between the state and insurers to reform the welfare state in a way that costs less and delivers more.

Currently, out of those that do stop work for health reasons for more than six months, only 1 in 5 will return to work.

In particular, insurance can help the state by getting people back into work. For example, employees and employers with Group Income Protection insurance make work adjustments in order to manage long term impacts on work capacity, which in turn can prevent people having to leave the workforce in the first place. Currently, out of those that do stop work for health reasons for more than six months, only 1 in 5 will return to work. This is why the role that insurance plays can be crucial. As well as the better replacement income it provides, it helps individuals to recover faster than they otherwise would through rehabilitation and other support services, as well as supporting them when they return to work, benefiting not only the individual and their family, but the employer, the Exchequer and the economy.

Currently, 1 in 10 workers have insurance to protect their income against the risk of being off work due to illness. There is much pressure to justify and reduce welfare spending, particularly for those who one day might be able to work again. Research undertaken by the Centre for Economic and Social Inclusion has shown that if 30% of working families had Income Protection insurance through their employer, or individually, this could save the Government £330 million.

State welfare should be there to help those that need it most when they cannot work due to illness or injury. But where possible, the goal of welfare should also be to keep people in long term employment and help them return to meaningful work when they have been forced to stop work for health reasons. A greater partnership between insurers and the state in future welfare reform can help strive towards that goal.

Helen White is Assistant Director, Head of Protection and Health at the Association of British Insurers (ABI).

Last updated 29/06/2016