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Government latches onto the benefits of group income protection

1 June 2017

Finally, the penny seems to have dropped about group income protection, following years of government lobbying by providers to try to secure further tax advantages.

This April saw the product become central to a constructive Parliamentary debate on workplace health for the first time – although, because it took place within hours of the announcement of the snap General Election, this has received little publicity.

Penny Mordaunt, Minister for Disabled People, Health and Work, echoed the support shown for group income protection in the ‘Improving lives: work, health and disability green paper' and emphasised that the government did not wish to lose momentum on the policy initiative that is considering a number of options for fiscal incentives to promote the product amongst smaller employers.

Taken in conjunction with positive feedback from an ongoing government trial which sees employers enjoy reduced business rates if they actively target employees’ health and wellbeing, such comments certainly seem to bode well for the future. But at the same time we wouldn’t advise anyone to hold their breath.

First we must await the publication of a White Paper and, even if that materialises in good time, who can guarantee that government priorities won’t change following the outcome of the election and the inevitable preoccupation with Brexit?

Nevertheless, this endorsement in high places should be seen as further proof of the value offered by group income protection, whether it in due course gains additional fiscal  advantages or not. 

The product, which is already a tax deductible business expense and does not create a P11D liability for employees, pays out a regular income if employees are unable to work due to long-term sickness or disability. The income starts after an initial deferred period, of typically three or six months, and continues up until the employee’s intended retirement date – although low-cost schemes also now offer the option of limiting pay-outs to between two and five years.

But the key message, which was highlighted during the Parliamentary debate, is that group income protection now provides far more than just a core insurance mechanism. The major providers pride themselves on including a range of added-value features like employee assistance programmes (EAPs) and services to provide second medical opinions and care support to claimants.

Most importantly of all, they also provide early intervention and rehabilitation services to help employees return to work, often within the deferred period. These facilities, which are particularly effective in tackling stress-related conditions, keep premium increases under control by minimising claims, and they also reduce absenteeism.

According to the Simplyhealth/CIPD 2016 Absence Management survey, the overall medical cost of absence now averages £522 a year per employee. Stress is playing a major part in this, being the most common cause of long-term absence and the second most common cause of short-term absence – after minor illness. Indeed, nearly one third of survey respondents reported that stress-related absence in their organisation had increased during the past year. 

Providers are increasingly coming out with data to illustrate the effectiveness of their ability to intervene early. For example, Canada Life reports that during 2016 the nurses from its Early Intervention service worked with 740 employees but only 53 of these became long-term absentees. More importantly, 527 of them were safely returned to work, with an average absence duration of only five weeks.    

In the case of some workforces this ability to get employees back to work before they claim probably pays for the cost of the entire income protection scheme – even if no claims are ever made. But, even if it doesn’t, premiums can be much less than most employers imagine.

An SME can take out a low-cost limited-term scheme for as little as 0.25% of payroll and, because this will include the same added-value benefits as a full-blown scheme, it could enable it to control absence without the need for an occupational health function.

So, although further fiscal advantages would be useful, surely there is no need to wait for them if a product already sells itself? If you require further information or advice on how a group income protection scheme might benefit your company then please do not hesitate to contact Chase de Vere on 0345 300 6256 or complete this simple form and we’ll call you.