Government exploring greater role for group income protection

Ryan Bembridge

November 2, 2016

IP income protection rain umbrella

The government has released a green paper looking at how more employers can get on board with group income protection.

The report, called ‘Improving Lives: The Work, Health and Disability Green Paper’, called on the insurance industry to develop affordable group income protection products for smaller firms.

Yesterday a Department for Work and Pensions representative met with the Income Protection Taskforce, reportedly to drum home the message that both employers and their employees need to understand the benefits of income protection.

Hinckley & Rugby signs with First Complete and Pink

The government’s primary focus was said to be safeguarding those with mortgages.

The green paper read: “We think group income protection insurance policies have a much greater role to play in supporting employers in taking this action and therefore want to explore why larger employers are not making better use of these products and what would encourage them to do so.

“We are working with the insurance industry to explore the viability of group income protection insurance products for smaller employers and, if there is sufficient interest, could look at how such employers could be supported to pool resources to purchase existing products as a collective.

“We therefore want the insurance industry to develop group income protection products that are affordable for, and tailored to meet the needs of, smaller employers, including micro businesses, and for them to raise awareness and make access to such products easier.”

Roy Mcloughlin, partner at Master Adviser, was at the IP Taskforce meeting and is pleased the government is liaising with the insurance industry in such a way.

He said: “There is an acceptance from the government that insurance is part of the solution which is very good news.

“An education piece needs to be facilitated on behalf of individuals and also employers.

“The government’s primary concern is people’s mortgages. What’s everybody’s biggest liability if they’re ill? The mortgage.”

However he disagreed with the government paper for suggesting there needs to be cheaper group income protection products for smaller firms, adding: “It is already cost effective for small companies; it’s a much cheaper product than people think.”

But Kevin Carr, managing director of Carr Consulting & Communications, reckoned he understands first hand why small businesses might snub group income protection.

He said: “As an owner of a small business I understand the challenges. Running a company is not always as straightforward as you would like and there are a range of decisions to make and costs to pay, especially as you grow.

“As a general rule you’re more concerned about cash flow, keeping costs down, having the right structure and keeping the tax man happy so other considerations can often take back seat, even if they are good ideas.

“However, it is just as important to attract and retain the right people, which includes benefits such as income protection, both for the business as well as the individual.

“The DWP green paper a big opportunity for the IP industry to step up to the plate.”

Paul Litster, managing director of Specialists4protection.co.uk, told the government to make tax breaks available if it’s serious about wanting group income protection to take off.

He said: “This green paper could be the start of a significant shake-up of the entire sector.

“However, if group income protection schemes are to be a success, the government needs to ensure the appropriate tax breaks are available to make them attractive to employers and employees.

“If such tax breaks are not available then ultimately the burden will fall on the government or NHS – and we all know the immense amount of pressure they are already under.”

He added: “By launching this green paper, the government is sending out clear signals that they see protection insurance as coming of age and ready to take its place as a mainstream product in the insurance toolbox.”

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