Can insurance help cut the welfare bill?
The government is currently reviewing its strategy on how to address health in the workplace.
In October 2016 it published Improving Lives – The Work, Health and Disability Green Paper to address the issues surrounding ill-health and disability and get more people back to work.
As this document points out, ill health amongst working people costs the economy £100bn a year.
Amongst other things, it focuses on how insurance can help prevent ill health in the workplace and get people back into work if they do become incapacitated.
In particular, the government is keen to examine the role of group IP and how employers of all sizes can increase its use.
In response, industry body Group Risk Development (GRiD) has called upon employers to make more use of the array of added-value services available via a group IP scheme. While others have suggested tax breaks for employers buying group IP, although some experts close to government circles have expressed low - to no - expectations on the latter score.
SAMI Consulting has been working with the Income Protection Taskforce to respond to the government’s green paper.
Richard Walsh of SAMI Consulting suggests the government should focus on boosting take up of individual income protection to help address the low levels of cover among the self-employed. But he warns this would need a change to the system of means testing to prevent people being penalised for taking out cover.
He also suggests using the lessons learned for pensions auto-enrolment to inform employees of their potential state benefits, as well as giving the new Single Financial Guidance Body a statutory requirement to maximise the number of people able to withstand a final shock.
So how does this affect the protection market? The overlap with the benefits system does offer some opportunities.
Using Family Income Benefit to supplement the new Bereavement Support Payment
This year’s changes to the Bereavement Allowance are something the protection industry should be considering. While some elements have been increased, the change to the payment term for Widowed Parents’ Allowance could be significant.
Johnny Timpson, protection specialist at Scottish Widows, notes: “Under the present system, the potential payment to a bereaved spouse or civil partner with a very young dependant child provided by Widowed Parents’ Allowance could be as much as £119,050 over a maximum 20-year support period, the average payment being around £29,000. This compares with a maximum of £9,800 under the new Bereavement Support Payment benefit and 18-month support period that will replace it.
“It’s estimated that 91 per cent of widowed parents will be supported for a shorter period of time than they would under the present system, which can pay out until the youngest child leaves school, according to research from the Childhood Bereavement Network.”
