Incapacity benefit for new claimants – a benefit relied upon by 2.6 million Brits – has been scrapped in favour of employment and support allowance, designed to give people the support they need to improve their health, skills and look for work.
Inevitably, this radical reform – which forms a part of the Government’s plans to get one million people off incapacity benefit benefits by 2015 – has identified a host of issues and opportunity for the protection market. Starting with work-based rehabilitation schemes.
A handful of firms already offer rehabilitation services to employees, for example Norwich Union with its Back-up early intervention service and Bupa with its absence scheme and health risk management.
According to NU head of clinical governance Dr Doug Wright, 50 per cent of employees who used Back-up said the service prevented them going absent or restricting their duties.
In this year’s Swiss Re Insurance Report: Life at the crossroads, technical manager Ron Wheatcroft highlighted how rehabilitation is slowly becoming commonplace.
He said: “Prevention and rehabilitation are now becoming common in an increasingly litigious culture where employers are compelled to protect the health of their employees at work. It is in the best interests of employers to address these issues, given the direct correlation between a healthy workforce and its productivity.”
A way of encouraging more firms to offer rehabilitation schemes could be via the tax system. Wheatcroft suggests the tax benefits should reward employers who provide rehabilitation services. This idea is supported by Bupa director of group risk Graham Clark.
Clark says: “Logically, it seems like a reasonable thing to do and perhaps pressure will build for it. They are not only saving money in terms of benefits being paid out on a private basis but saving the state having to pay for benefits also.
“If the Government wants to encourage this sort of thing then certainly giving some sort of tax break will the obvious way to encourage other companies to introduce these measures.”
Another potential advantage of the new law is the prospect of it boosting income protection sales. As benefits become harder to claim, the importance of IP is likely to be highlighted, says Royal Liver IFA manager Aidan Dewhurst.
Dewhurst says: “In our industry we all know the importance of protection, but maybe this is an ideal opportunity to make consumers equally aware. You never know, by responding in the right way we might even go some way to helping reduce the protection gap.”
Likewise, Income Protection Task Force co- chairman Clive Waller says: “If the industry uses this opportunity effectively it can stimulate sales of IP. The work that has been done in researching the value of work is very interesting but the additional publicity given to the size of state benefits will underline how little people have to live on if they are long term disabled and have no disability insurance.”