Group Risk policy expansions have happened organically, clearly evidencing the value that insured employers place on this benefit. However, much of this expansion has happened on the back of things such as pensions automatic enrolment, e.g. pension scheme eligibility is retained and then includes all the newly enrolled employees.
Relaxing limited entry schemes has a raft of additional benefits beyond lower costs (per person, rather than in absolute monetary terms). Examples include unit rating rather than individual costing, enabling budget certainty, and higher medical underwriting limits, reducing the need for senior employees to go through the hassle of medicals.
While automatic enrolment means every employee has access to a pension, employers need to attract and retain the best staff. Offering a differential benefit package needs to be discussed. In particular, in emerging industries or those where there are skills shortages, or for employers with high turnover rates, there are opportunities to differentiate salary packages with benefits.
Group Income Protection - a market in waiting
Cost should not be a barrier when you ask your client “what would happen to you if you were sick?” Employers should bear in mind that that the Work Related Activity Component (WRAC) will align with Jobseeker’s Allowance in April 2017, reducing it by 30%. State provision is getting smaller and people may have to contemplate the question, “could you live on £3,801 per year?”
The only way ensure a particular income is to have a fixed GIP benefit, e.g. 75% of salary with no State deductible, and you can forget about relying on any potential additional payments. State benefits change with time and circumstance. Children leave home, couples separate and some benefits (such as WRAC) are time-limited.
Around half of all GIP schemes have a State benefit deductible, so delinking the product from any relationship to State benefits has to be an industry aim – not least as every time a benefit profile is changed organisations may have to go through an employee consultation processes, something an adviser can support.
In terms of affordability, it does not have to be paid to State Pension Age to enable employers to have some form of benefit. Limited payment GIP, which represents around 37% of the current market by employees covered, pays benefits for two to five years rather than until retirement and can also help make the benefit more affordable. Since around 40% of employees are able to complete a return to work within three years they provide superb value for money. These budget options can cost as little as 0.2 – 0.5% of salary, yet they provide invaluable financial protection should an employee find themselves unable to work due to illness or incapacity.
