The Government has launched a green paper calling for better take-up of income protection insurance amongst employers and asking the industry to develop new products tailored to the needs of smaller firms.
The Improving Lives: Work, Health and Disability green paper, issued by the Department for Work and Pensions and Department of Health yesterday, calls on the insurance industry to spell out the role it can play in supporting the recruitment and retention of disabled people and people with health conditions, and wants views on how employers of all sizes can be encouraged to make better use of group income protection.
The green paper cites analysis from the Centre for Economics and Business Research that employees who have access to early intervention and rehabilitation services and use them tend to have shorter duration long-term absences compared to those that do not. That research calculated that on average, the duration of absences is shorter by 16.6 per cent.
Industry debate is now expected to focus around the type of tax break or other incentive that should be sought to promote greater uptake of income protection amongst smaller businesses. Industry experts say the extent to which there is appetite from intermediaries to distribute any new products will be key to getting buy-in from policymakers for change.
Then consultation says: “We want to see employers doing more to invest in their employees health and wellbeing and to thereby reap the benefits that such investment brings. We think group income protection insurance policies have a much greater role to play in supporting employers in taking this action and therefore want to explore why larger employers are not making better use of these products and what would encourage them to do so.
“Smaller employers are also important: they represent the vast majority of UK businesses and employ around 36 per cent of the UK workforce. We are working with the insurance industry to explore the viability of group income protection insurance products for smaller employers and, if there is sufficient interest, could look at how such employers could be supported to pool resources to purchase existing products as a collective.
“We therefore want the insurance industry to develop group income protection 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.”
Unum head of public affairs and CSR John Letizia says: “The Government won’t do anything on GIP unless there is clear evidence that the industry is up to the challenge, and that includes brokers. The door is open on tax breaks, but there is no point pursuing the tax breaks angle if brokers say no.
“Our proposal is for a NI break for employers who offer GIP to all staff. For a premium of £250 this would work out at a discount of around £30, which would be tax neutral for the Treasury as it would pay less out in benefits.”
Consultation questions:
– What role should the insurance sector play in supporting the recruitment and retention of disabled people and people with health conditions?
– What are the barriers and opportunities for employers of different sizes adopting insurance products for their staff?