The changes are designed to allow for the fact that the Employment & Support Allowance (ESA), which comes into force on 28 October 2008 will provide a lower rate of benefit compared to the current incapacity benefit allowance.
GIP benefits that take the current state incapacity benefit into account will have to be altered. Canada Life will be offering endorsements on all claims to reflect the changes to the state benefits system.
The maximum benefit amount available through non-integrated benefits has increased from 66 per cent of salary to 75 per cent.
Integrated benefit, which takes into account the current state incapacity benefit, will now reflect the new system. Employers can choose to cover for a percentage of salary, less a deduction from a range of state benefits.
Net pay protection takes into account the state incapacity benefits that are actually payable to the claimant and ensures that claimants receive up to 90 per cent of their usual net pay allowance. As claimants are likely to receive less under the ESA than from incapacity benefit, the provider says it will ensure that each of their GIP claimants subject to the ESA system will receive up to 90 per cent of their previous take home pay, by making up the shortfall of the lesser benefit.
Policies with Canada Life are under a two-year rate guarantee meaning none of the extra costs associated with the new rates will be passed on until the current rate guarantee expires.
Marion Ware, head of marketing, Canada Life Group Insurance, says: “With the ESA due to come into play in October, those deemed unable to work are likely to be entitled to a smaller benefit allowance.
“These changes are therefore a great opportunity for intermediaries to sell group income protection, as the benefits become more valuable to employees.”