A manifesto for group risk

Katharine Moxham, spokesperson for Group Risk Development, asks how politicians could get the group risk vote and what the industry’s manifesto should look like

Next on the wish list would be a commitment to incentivise employers and individuals to close the protection gap which, at the end of 2008, remained at £2.3 trillion for life assurance and £190 billion per annum for income protection. Without company-sponsored insured benefits, the UK’s protection gap would be even greater – in excess of £3 trillion for life assurance and in excess of £230 billion per annum for income protection.

Although the industry currently saves the Government considerable burden – both in effort and monetary terms – at the moment, this largely goes unacknowledged. My party of choice would change all that, and recognise our contribution by offering tax breaks on employer provision or possibly even a contracting-out mechanism.

Clarity around the legality of ceasing group risk benefits at a specific age, as well as changes to the taxation system that encourage new ways of financing death and disability cover – so that employers would finally be able to confidently accommodate those wishing to work beyond age 65 – is also a ’must have’. This could mirror the approach that is taken by the Government, where, for example, entitlement to Employment and Support Allowance ceases at the age that the State pension becomes payable. This simple alignment would provide defined risk for insurers and clarity and ongoing affordability for employers – a win-win situation for all concerned – thus enabling us to keep working towards plugging the UK protection gap.

Extending auto enrolment under personal accounts (Nest) to include group risk or personal protection benefits also has tremendous appeal, and would be a further step towards self-sufficiency and personal responsibility. After all, under-saving does not just affect pension provision, it affects other areas potentially far more devastating in terms of financial distress because timing cannot be predicted – death, illness, accident and disability. These are risks which could become manifest at any time to an individual, so why not take steps to ensure adequate protection provision?

Welfare reform is well underway in the UK, and is likely to continue regardless of what form the Government takes in 2010. So we’d like to offer our considerable support in implementing this. The Welfare Reform Act sets out a framework that will see a significant proportion of those currently claiming benefits embarking on a pathway to work. In a broader context employers will have greater responsibility to provide vocational rehabilitation and support to help employees enter and remain in the workplace. Given that we in the group risk industry pioneered vocational rehabilitation in the UK, we have a wealth of experience to share with policymakers and this should not be overlooked.

The importance of “education, education, education” cannot be understated – of policymakers, of employers, of end users. According to recent GRiD research amongst 500 employers with up to 1,000 employees, a lack of understanding is the key barrier for employers who do not currently provide group risk benefits.

Often the importance of group risk benefits is not understood by employees either, or a “mañana” attitude prevails. To take personal responsibility one must have awareness and incentive, so this situation can not be left to continue. Consumer education has a crucial part to play here, as well as incentivising employers to make provision that can ease the state burden. How will the group risk party of choice set about achieving this?

Additionally, the Insurance Industry Working Group’s report “Vision for the Insurance Industry in 2020” recommended partnership between the insurance industry and Government to better manage risk in society and to improve customer outcomes. 2020 seems a long way away, so let’s see a commitment to bring this outcome forward several years.

Last, but by no means least, it would be great to find a way to isolate group risk benefits from the unintended consequences that often follow well-intended pension policy. These are important and highly valued benefits in their own right and should have their own legislative framework.