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To protect and serve

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&#39s 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

incapacity benefit:

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

other work.

Unfair and outdated incapacity benefit rules.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

risk benefits.

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.

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