As we approach the election it is worth looking at the Conservatives' ideas on welfare reform.
Because there will be implications for providers - including insurers - who are supporting rehabilitation and back to work programmes for people on incapacity benefit (IB), income protection or employers liability insurance. Current state funded (but often privately provided) schemes operate largely independent of insurance based schemes. In my view, there will be pressure for convergence - both from a practical/commercial and social interest perspective.
The shadow Minister for reform is David Freud - an acknowledged expert on the subject, who defected from labour last year, and is virtually certain to take on the Ministerial role in a new government.
In November he gave a revealing speech to the Institute for Employment Studies about their new policy ‘Get Britain Working'. First, from a social interest perspective - the benefits system prevents people from working, and not working is actually not good for them. Freud estimates the long-term IB cost as £25bn a year, every year. Adding in the social costs could raise this to £80bn. And finally, it's not good for society to have a lot of people in a dependant state. It results in the ‘Broken Britain' of intergenerational worklessness, lack of role models and rise of antisocial behaviour.
Second, both parties are committed to transferring all IB claimants through the Work Capability Assessment (which takes over from the Personal Capability Assessment) over the next three years. The results so far have been surprising. Fewer people on IB are going onto the Employment and Support Allowance (ESA) than was expected. 70% of people are being put straight onto Job Seekers Allowance (JSA) and 30% are being split between the ‘support' and the ‘work capable'.
We don't yet know what will happen when all IB claimants are transferred through the Work Capability Assessment, but it is clear that a substantial proportion, many more than expected, will go straight to JSA. Some of us may have guessed it, but many IB claimants are not in that situation because of any underlying health condition.
So, thinking of the future of these people, the fundamental reason a lot of people will be out of the workforce is because they've found it very difficult to find a job! In other words, we will have a paradigm shift from a debate about different reasons for entitlement to different benefits to a debate about how to bring the potentially economically active into employment (regardless of whether they were on JSA or IB).
So what does this mean in practice? Here the policy details are sketchy. There is recognition that it will be a long haul, by supporting a different business model where rehabilitation/back to work providers will have to have a very close relationship with their clients, and their employers, over one to three years, rather than the current 13 or 26 weeks. The change to longer term relationships should help all concerned. But, for some insurers, the paradigm shift away from incapacity to capability is much more problematic. Will it really be justifiable to support a small cohort of the population based on the old model (e.g. unfit for own occupation) when everyone else is being encouraged to work?
Richard Walsh is a director and fellow of SAMI Consulting www.samiconsulting.co.uk
