Income protection is a misnomer and the product should be rebranded to reflect the broader range of services it offers, say experts at the Corporate Adviser Healthcare and Group Risk Summit.
Speaking at the event in London this week, Canada Life group income protection proposition manager Scott Rayner argued that income protection only represents one fourth of the proposition, and suggested that the industry could do better at communicating what it offers by rebranding the product to reflect its other features – workforce engagement, absence management and claims management.
The event saw advisers, providers and other stakeholders focusing on how the benefits of group income protection could be best communicated to government. In breakout sessions discussing how the industry could better position its products, and how the sector could be made more effective, advisers called for greater government promotion of the benefits of return-to-work services, a requirement for employers to give a statement of how much sick pay they offer and simpler products that could be flexed up.
But Rayner also criticised advisers for using limited term group income protection as a solution to rising costs caused by an ageing workforce. He argued this simply widens the protection gap.
PWC head of healthcare and protection Naomi Saragoussi said spiralling PMI costs had frightened some employers off taking on further insured obligations. She said the industry would in time move away from insuring the entire workforce towards offering cash amounts for benefits for older workers to spend as they choose on the products most relevant to them.
Rayner said: “There are four areas of support for an employer – workforce engagement, absence management through early intervention services, income protection and claims management services. This is what you get from what we call income protection. We focus on the third of these areas and not the other three. Maybe we need to change the name income protection. Maybe income protection is the wrong word.
“Limited term has increased from 10 per cent in terms of the number of policies out there in 2010, to 17 per cent this year. Is that protecting the employer and the employee? I have no problem using limited term if it is to expand GIP across an existing workforce. I have got a big problem with it if it is the default to control the costs. We all know limited term cuts the cost by 80 per cent. So using limited term in the face of dealing with an ageing workforce does the exact opposite of protecting that workforce. It is really important to engage with the absence management facilities so that you can afford to invest in a benefit design that looks after your ageing workforce. As workers get older their likelihood of getting older increases. So it is important as an industry we don’t kneejerk to limited term as it flies in the face of what is actually happening in workplaces.”
Grid spokesperson Katharine Moxham said: “We have constantly come back to whether the name should be changed. But the product is so different nowadays that perhaps back to work support, absence support, sickness support or whatever, because it is such a way down the line that money has to be paid, if it has to be paid at all.
Saragoussi said: “If you went to the average HR director would they know what a cash plan does? No, the name doesn’t tell you what it does. So maybe we should give the products a name that describes what we are trying to sell, rather than a name that nobody understands.
“One of the risks for the risk market is the private medical market, where people put PMI schemes in years ago and they have seen the costs increase in 5-6 per cent, and in some cases 15-20 per cent and they are very worried about what happens to things they put in place. We had schemes that were put in at £150-200 per person and now we have people in London who are paying over £1,000 for a single person. People are scared because of that.
“We have to have something in there for older workers, and maybe that is a sum of money so employees can decide what it is they want from my work-life balance. Here is your pot of money the company will give you, and what do you want to do with it. Do you want to take a modular approach to PMI where you only take outpatient cover, because if you contract cancer, the NHS is a good place to be. Can I use some of the money I have saved off my PMI to go towards my income protection. But I don’t think the industry or the technology is there yet.”