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Steve Webb ‘sceptical’ about bigger role for income protection

Pensions minister Steve Webb says he is “sceptical” about a larger role for income protection in supplementing state benefits provision.

Speaking at an income protection debate hosted by Zurich and the New Statesman in London today, Webb said he is “open-minded but sceptical” on the subject of the Government subsidising employers to provide income protection. 

He said: “Private insurance tends to be more selective and less comprehensive than the cover that the state gives.

“Presumably it is the best employers who will be interested in this, so I question whether we are worrying about the wrong people. The people we are most worried about – those in fragmented employment or on zero hours contracts – their employers wouldn’t touch this with a barge pole.

“And if the Government had some money to spend on this in the short-term, wouldn’t prevention be better than restitution? Occupational health is under-resourced in small firms, so shouldn’t we be spending public money on preventing people going off sick in the first place?”

Webb said the insurance industry should focus on how they can rehabiliate sick employees back to work more quickly than the state when lobbying Government on the issue. 

He added there is an opportunity for the private sector to supplement the state through long-term care insurance.

He said: “Long-term care is an area where the state provision is minimalist and most people want better than that, so with the new pensions freedoms and the Dilnot cap this seems to be the next place for private insurance to supplement the welfare state.”

Financial Services Consumer Panel member Teresa Fritz, also speaking at the event, said she is “frustrated” with the industry on the issue of why income protection is not sold more.

She said: “We have been talking about this for decades. The financial services industry has some awful products, but income protection is the jewel in its crown.

“It’s a great product: it’s affordable and it pays out. But consumers don’t know about it and it is not sold to them.

“The problem is that at key life stages like taking out a mortgage, critical illness is sold to them and that is the family budget on protection blown.”

Fritz said the best way to sell income protection is through employers, but argued now “is not the right time” given the demands on employers in implementing auto-enrolment.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Interested Observer 8th January 2015 at 6:14 pm

    Why not….
    1) help affordability by making premiums free of taxes, company and personal
    2) get the government/industry to promote the need to protect income
    3) ask regulators to take more interest in what advisers are recommending to their clients to cover this need
    All the above can be applied to Health Cover too. Why we aren’t trying to take the strain off the NHS through private care beggars belief.

  2. Good idea IO and I agree with T Fritz. Is the lack of penetration of IPP a by product of RDR? Up skilled IFAs to level4 who now mainly focus on Investments and pensions clients, hence those nearing retirement or past it where IPP is often not appropriate while the lvl3 mortgage advisers focus on meeting the mortgage and its basic protection needs and IPP is put off until after the house purchase? I suspect so.
    IPP is a brilliant product to meet an essential need for many, but is time consuming to sell and it has to be SOLD. It is never bought. Something for Martin Weatleys beloved behavioural economics if he knows it is never bought and needs to be sold, something needs to be done to encourage its sale otherwise the needs simply cannot be met by state benefits paid for thru NI which simply is not an insurance but like sticking a plaster on a gunshot wound.

  3. I’d like to see this buffoon continue to live his current lifestyle on state benefits.

    Is he getting income protection mixed up with private medical insurance – if so he’s in the wrong job.

  4. I regularly raise with clients the issue of IP but the biggest obstacle is cost, particularly those in Class 3 and 4 occupations. Add inflation protection and it becomes even more expensive. From where Teresa Fritz gets the idea that IP is affordable I really don’t know. For the very people who need it most, cost is the biggest barrier.

    There’s also the inconsistency between the fact that the premiums for employer-sponsored group schemes (DiS as well as IP) are allowable against tax whereas no tax relief is allowed on premiums to individual policies. Levelling this particular playing field would be a good step towards encouraging people to top up their State cover which in most cases really isn’t, by itself, at all adequate.

    And on what basis does Steve Webb propose that the insurance industry should focus on how they [providers] can rehabilitate sick employees [and get them] back to work more quickly than the state if they’re not actually paying out benefits from an IP policy? What’s in it for them? They’re not charitably funded institutions..

    Every time this guy opens his mouth he reveals yet again how divorced his thinking is from the realities of commerce.

    get the idea that the insurance industry doesn’t do everything possible to get IP claimants back to work as quickly as possible?

  5. Part of the problem is a failure to understand what IP is about. Sadly that understanding only comes about when it is too late. Unless you or a member of your family becomes to ill to work (or at least continue earning what they previously earned) then it is hard to appreciate how essential it is. It is not about cost v benefit in monetary terms. It is about dealing with the emotional and physical issues that comes about when you are ill. Mr Webb is too privileged to understand I suspect.
    What make IP even more essential these days is that people are more in debt, working longer through necessity and easing off at 55 is not an option for many.
    As for affordability, with more and more of the population overweight (obese) the chances of them getting cheap IP are zilch. Which says much for what the Government could do – tax alcohol, sugar, dare I say it the fat and obese and encourage a healthier lifestyle. Imagine saying that in election year?
    ( I speak as someone who was overweight, with high blood pressure and on medication. By changing my lifestyle I am off tablets and have not bothered the NHS for several years. I now understand why my GP had a go at me!)

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