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The importance of reviewing group income protection

1 February 2017

Group income protection scheme products now extend well beyond offering a core insurance mechanism that pays a regular monthly income in the event of employees being unable to work due to long-term sickness or disability.

Insurers now commonly pride themselves on their ability to prevent claims arising in the first place by intervening early and working with the employer to provide expert rehabilitation services to help get employees back to work before the insurance cover kicks in at the end of the initial deferred period - which typically lasts three or six months. This facility, for which there is no additional charge, both helps to reduce absenteeism costs and to keep premiums affordable at renewal.

Many group income protection schemes also now automatically include other added-value services which would have a significant cost if purchased separately. Whilst different insurers provide different ranges of such add-ons, they can include guidance for those seeking second medical opinions or practical advice and emotional support for those suffering a bereavement, serious illness or long-term disability.

The majority of schemes also now offer an employee assistance programme (EAP), which can prevent employees taking time off with stress by offering telephone-based or face-to-face counselling before problems become too serious. Additionally, EAPs can provide anything from critical incident support or debt counselling to line manager assistance and advice on dealing with elderly parents.

Nevertheless, however content an employer might be with their current group income protection arrangement, the chances are that they haven't fully communicated the benefits to their workforce. This means that they aren't securing the optimum potential return on their outlay because employees cannot value what they don't know about.

Chase de Vere can help devise a suitable communications strategy to maximise the benefits of group income protection as a recruitment and retention tool, highlighting the availability of the added-value services as well as the insurance cover.

Employers should also regularly review their scheme as this market never stands still. The competitive position of insurers is constantly fluctuating as they alter their rating structures and cover features, and new government legislation, such as changes to the State Pension age, must also be taken into account.

Once again, we can help as we are fully up-to-date with the products available and with current legal and technical requirments. For example, if your scheme still only provides cover up to age 65, you may decide that it's appropriate to extend it to cover to State Pension age.

Those seeking to trim costs may also wish to consider whether to extend their deferred period from three months to six months or from six months to twelve months - provided that this fits in with their sick pay strategy and contract of employment. Or they may want to think about switching to cover that still pays out if employees are unable to follow their "own occupation" initially but changes to an "any occupation" basis once a claim has lasted five years. This approach would at least still ensure that the most severely sick and disabled remained covered until retirement age.

An even more dramatic cost-saving step would be to opt for a scheme that pays out claims benefit for a maximum of somewhere between two and five years instead of until the employee's intended retirement age. Although costing less, such limited-term schemes can still automatically include the added-value features available on the full-blown formats.

Limited-term cover does, however, come with a major potential downside. If a severely incapacitated employee ceases to receive benefit after two, three or five years and is forced to rely on the extremely limited State safety net, it could undermine the company's reputation as a caring employer and create considerable ill-will amongst other workers. Such a step should therefore only ever be taken after careful consideration.

We would be delighted to discuss such issues with you, to review your current group income protection scheme and to advise on how to most effectively communicate its benefits to your workforce. Please do not hesitate to contact us on 0345 300 6256