Robin Hyndley looks at what the latest DWP proposals mean for employers and employees, and explores how insurers could provide appropriates in the current environment.
Figures recently released by the Department for Work and Pensions (DWP) reveal nearly a million people in Britain sign off sick for at least a month a year. This absenteeism costs employers around £9bn annually for sick pay and associated costs, not including an estimated £4bn a year in lost earnings.
For the government, the bill in terms of health and disability benefits is even higher - around £13bn annually.
As the government moves to cut the welfare bill and companies introduce auto-enrolment for pensions requiring broader dialogue around financial planning with employees, now could be the ideal time for the public and private sectors to come together to reconsider and potentially restructure health benefit provision.
Under new government reforms to tackle long-term sickness absence in the workplace, workers who are off sick for more than a month will be referred for medical assessments. Employees will then be given a plan and timetable to get them back into the workplace as quickly as possible.
This reform suggests the government wants employers to take a more active role in managing both the wellbeing and sickness of employees. It also comes hot on the heels of auto-enrolment for workplace pensions, which offers employers a timely opportunity to broaden the conversation with employees about the structure of their employee benefits and how financial protection insurance products could help fill the financial gap created when short-term sick leave turns into a long-term absence.
The DWP changes are designed to protect businesses from the financial impact of sick leave and, at the same time, to help employees get back to work faster. They also have the potential to create opportunities for the insurance industry to work with employers, redesign the currently available group health products and provide better benefits for their staff.
For example, income protection (IP) and private medical insurance (PMI) tend to be sold to, or provided for, senior and white-collar workers. This means only a very small proportion of the workforce has the financial support to seek private health-related services, allowing them the freedom to select a practitioner and access services within a reasonable timescale.
Costs are high and the market is small because these products are typically offered on a long-term and comprehensive basis, requiring a significant ongoing financial commitment from either the employer or employee.
This tends to deter employers from considering these schemes and means that the majority of the workforce has to rely entirely on NHS services, where waiting times for appointments with a GP, and subsequent specialist appointments and treatment, can exceed four weeks.
Against this backdrop, there is an opportunity to develop affordable financial protection that covers the whole workforce, which can help fund treatment or rehabilitation services for employees that need support in the short term, to help them return to work more quickly.
