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.