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‘Improving Lives’ through income protection

Huw EvansHow a society treats its disabled and sick workers is increasingly an economic as well as a social issue. So it is encouraging to see the Government start to address both with its recent Green paper on ‘Improving Lives’.

I have a personal interest in this subject as someone who grew up with a disabled parent. When my late mother was diagnosed with Rheumatoid Arthritis in her mid-20s, it rapidly spelled the end of her working life. 50 years later, the Government is still wrestling with the challenge of how to increase the number of disabled people in work and how to help those who suffer with mental health or musculo-skeletal conditions get the early rehabilitation they need to be able to avoid long-term absence from the workplace.

Income Protection Insurance has a real role to play in this, especially in helping employees who develop disabilities and health conditions to stay in work. 86% of disabled people – like my mother – acquire their disability during their working lives and early intervention when someone first leaves work for health reasons is crucial.

It is here that income protection insurance can have a real impact – and it is welcome to see the ABI’s arguments around this reflected in the Green Paper. The evidence from a range of insurers shows that the treatment and specialist ‘back to work’ support provided as part of an employer-provided Group Income Protection (GIP) scheme reduces both the length and frequency of long term sickness absence.  8 out of 10 referrals to Canada Life’s early intervention service last year resulted in recovery before the claims stage and, where claims were made, their duration was shortened substantially. Unum supported 1,470 people back to work with its early intervention service last year.

The Green Paper rightly states that “group income protection insurance policies have a much greater role to play in supporting employers”. Currently, only around 7% of the working population are covered by some form of group income protection – with a further 3% covered by an individual policy. This should, and could, be higher, and so it is vital that we identify how more employers, both large and small, can be encouraged to provide this cover to their staff.

A policy response should be twofold

Firstly, there is a need to raise awareness among employers and the workforce about both the need for, and availability of, income protection. The Green Paper’s recommendation to create a ‘one stop shop’ which will, among other things, help employers to establish the business case for covering their staff with income protection, could be one way of engaging more employers about this product. Other options should also be considered.

Secondly, the Government should explore offering an employer’s National Insurance Contributions (NICs) incentive for businesses that cover their staff with income protection. Asking for a tax incentive is always a tough ask but the insurance industry has supplied detailed modelling to the Government to demonstrate the potential benefits.  The Green Paper highlights the role that financial incentives for employers can and do play to assist and encourage them to do more to support staff with health problems.

The inclusion of proposals on income protection in the Green Paper reflects over a year’s worth of dialogue with Government officials and ministers. When I met the DWP Secretary of State, Damian Green last month he was engaged and interested in the debate ahead. We now have to build on that to win the argument for fundamental long-term changes which will benefit employers and our wider society. Disabled workers are not a new phenomenon but there is no reason why our policy framework need be stuck in the 1960s as well.

Last updated 14/11/2016