‘Open debate’ needed on GIP incentives

Different colours of protectionAn open debate on how to develop incentives for group income protection is needed so the industry can present a coherent response to the recent DWP/DH Improving Lives Work, Health and Disability green paper, say experts.

Industry figures are calling for a co-ordinated approach to lobbying government on proposals for incentives for increasing coverage of group income protection, outlined in the green paper published earlier this week.

In that green paper the Government acknowledged the role insurers can play in reducing sickness absence and improving levels of protection and called for ideas for increasing take-up of GIP by employers, specifically SMEs.

The group risk industry has to consider what incentives would be most cost effective in increasing take-up by employers currently not offering GIP and how these can best be targeted, and how state benefits could be changed to make benefits more attractive.

Canada Life Group Insurance marketing director Paul Avis says: ““The industry can evidence the great work that group income protection does – we can show that where early intervention and rehabilitation services are in place employees can get back to work with an average duration of five to seven weeks, thereby limiting employers’ occupational and statutory sick pay costs and improving productivity. But the fact that between 7 and 8 per cent of employees are covered by GIP means we are clearly not getting our message across.

“The industry needs to come together and present aligned proposals, rather than closing down options. We need to work out whether we should be asking for tax incentives or National Insurance reductions – and where these are targeted. Blanket reliefs come with a deadweight cost to the Treasury as a result of the 2.1m people covered by GIP already. So we need to consider whether incentives should be targeted, and how payouts are offset against Universal Credit and Housing Benefit.

“But at the same time we need to ensure that existing customers are ensuring that their scheme design reflects the forthcoming changes to state benefits. At the moment there is a worryingly large number of schemes that are not ready for what is coming next April.”

ABI director general Huw Evans says: “The Green Paper is absolutely right in stating that group income protection can play a much bigger role in helping both small and large businesses support employees with health conditions. Currently, only 7 per cent of the population has cover through group income protection and we are committed to helping the Government explore how to encourage more employers to provide this vital protection to their staff.”

Grid spokesperson Katharine Moxham says: “We welcome the DWP/DH Improving Lives Work, Health and Disability green paper and are particularly pleased that the role that group income protection can play in supporting employers’ health, wellness and attendance programmes has been recognised.

“Group income protection enables employers to take a more proactive approach to the health, wellbeing and financial resilience of their employees. Both Government and the industry have a role to play in raising awareness of the need to protect income against the consequences of prolonged illness or disability and the importance of the workplace in particular in helping to achieve this. We recognise the difficulties faced by SMEs and would be happy to work with Government on initiatives to grow awareness amongst them.”

Specialists4Protection managing director Paul Litster says: “There is appetite from advisers to target SMEs if new tax incentives are created. Whether £30 off a £250 per person GIP premium is enough to swing the deal is not certain, but it will definitely enable advisers to start the conversation. Targeting incentives to sub 50 employee firms for death in service, PMI and GIP has to be a good idea for the Government as it reduces the strain on the public purse.””