I am an IFA with a small SME client that has 150 employees and trying to put into place a group income protection (GIP) scheme. The company has no sickness records. How involved should I be in this? How can I convince them they need to start records and how do I instigate it?
Paul Avis, Canada Life
The first thing the employer needs to be aware of is they have a duty of care to their employees under the Health and Safety at Work Act 1974. They also have further obligations under the Equality Act 2010. Without sickness records they are not able to evidence they have complied with both of those.
Employers should also recognise they should have an absence policy. If they haven't complied with an absence policy and procedure, again they would possibly lose any tribunal or court cases that were bought against them. The need to record sickness absence at a base level is to comply with the law.
On a more positive note, insurers now offer vocational rehabilitation services as part of a standard package aligned with their GIP policies. Most insurers would want to get involved at six-ten weeks absence so if an organisation is not keeping sick pay records, then it would be difficult to record when the employee first went off sick. In theory most employers have a sick pay policy too where they would have, say, six months full pay, six months half pay.
There are day one outsourced sickness absence services either via telephone recognition or self-service online. An adviser should at least have a working knowledge of these as some of the providers can be massively beneficial. This isn't just about income protection but it could also prompt a critical illness claim. There are a number of these absence services out there.
Paul White, Punter Southall Health & Protection Consulting
Employers and IFA's alike often miss the link between the insurance contract and the employer obligations. GIP is after all just an extension of the employers occupational sick pay programme. Effectively the employer is simply insuring their obligation to provide continued pay to employees who are long-term sick.
In assessing whether the benefit is appropriate the IFA will need to consider how the company currently deals with absence, both short-term and long-term.
If the employer has no obligation to provide long-term sick pay to employees, then the employer will want to understand fully what this means to them and how the cost of cover will be driven by the absence experience under the arrangement.
An employer will want to understand what their current sickness experience is and how much this is costing them, as undoubtedly, unless the employer is self-funding long-term disability, their current expense will be in relation to short-term sickness.
The cost of absence in any organisation is significant - no matter how active/robust their absence policy is. The client should be doing all it can to control this costs. Indeed there is evidence that simply introducing an absence recording policy leads to an improvement in attendance, without necessarily building an absence management policy. The SME should be focussing on introducing a robust sickness policy and gathering absence data before considering how to deal with long term absence.
If the company is still interested in providing IP details of historical absence, experience will help insurers provide accurate terms.
Jon Campbell, LEBC Group
When I set up a new scheme, I advise on the trigger points, for example with a 26 week deferred system, I would set a trigger on the payroll system so it is flagged up an absence at six-eight weeks. It would be impossible to have a GIP scheme without having decent sickness records and no way of tracking the length of absences.
Monitoring sickness absence is key to getting the best value and benefit from a GIP Scheme.
Many employers historically
have seen GIP as a safety net for long terms sickness and are not aware of the additional services available to them to prevent and manage claims.
When setting up a scheme, it is essential that absence is monitored to ensure that the rehabilitation and claims management services offered by the insurer are accessed and, where possible, a sick or injured employee can return to work earlier than if the insurer had not been given the opportunity to get involved.
A common example is where an employee off for a period of time due to a musculo-skeletal condition and the insurer will in certain instances where a return to work can be facilitated, fund a course of physio.
The same can be true of stress related claims where counselling can be sourced via an associated Employee Assistance Programme (these are now commonly provided to GIP policyholders free of charge for their staff).
It is also essential that absence is monitored to ensure that claims are submitted in good time and to avoid claims being declined on the basis of late notification.
