More advisers are recommending income protection cover and more employers
are bolstering their benefit packages to recruit and ret-ain skilled
employees in an increasingly competitive labour market.
Latest figures from ERC Frankona show the group income protection market
increased by 18 per cent last year, with 70,000 more lives covered.
In the individual protec-tion market, ABI statistics show 155,000 policies
were sold last year compared with 149,000 in 1998.
The Government's prop-osals in its consultant document outlining the
future of the welfare system entitled, A New Contract for Welfare, will add
further weight and publicity to the need for inc-ome protection.
The consultation process has resulted in the Welfare Reform and Pension
Bill, which will become law from April 2001. And with new legislation comes
opportunities for advisers.
The legislation brings several changes to incapacity benefit, the core
state benefit payable to people who are unable to work because of illness
or injury. Personal advisers for claimants, alterations to the test and
stricter contribution rules will all come into effect.
The objective of the proposed changes is to tackle three problems with
Lack of support for dis-abled people to get and hold on to work.
The All Work Incapacity Test discourages those who have failed it to seek
Unfair and outdated incapacity benefit rules.
One of the major implications of these changes is that income protection
schemes are now even better placed to deal with ill health for employees
than medical retirement through pension schemes.
This is because pension benefits will be offset against incapacity
benefits but income protection benefits paid by employers will not.
Of course, the other major change being introduced in the bill is the
stakeholder pension regime.
Employers with more than five staff have until Octo-ber 2001 to install a
scheme if they do not already provide a pension.
Unum research shows 40 per cent of employers with between 10 and 50 staff
currently have no pension scheme in place.
Stakeholder pensions bring with them several issues for financial
advisers, not least remuneration.
How can IFAs cover the lost commission? The answer is that every employer
needing a pension arrangement becomes an IFA prospect for complementary
IFAs have just over a year to establish their firm in the market before
stakeholder pensions must be implemented by employers.
For group schemes, insurers have been revising their contract wordings to
take into account the new Contracts (Rights of Third Parties) Act, which
came into effect last week.
This changes the long-standing position in English law of Privity of
Contract. The changes affect employees who are members of group schemes
because they are third parties to the policy which is made between the
employer and the insurer.
Unum automatically grants employees the right to deal directly with us
once a claim has been submitted.
This move gives employees a far better stake in group benefits provided by
their employer and will streamline the process for resolving complaints for
employer, insurer and employee alike.