Think Tank Demos recently called for a minimum IP proposal along the lines of pension auto enrolment. John Letizia agrees.
In its recent "Paying The Price" report, Demos calculated that people with cancer are, on average, £570 a month worse off - a financial burden equivalent to the average mortgage.
At the same time, recent figures published by Public Health England and the ONS point out that cancer survival has been steadily increasing over the last ten years. Demos' key recommendation that Government and the insurance industry work together to develop minimum standards for Income Protection (IP), similar to those already in place for workplace pensions, is an extremely valid one and merits serious consideration.
The protection gap identified in the report is very real. Three hundred thousand people leave work each year due to long-term illness, including cancer, yet nine in ten have no back-up plan in place to protect against this eventuality.
Without a financial safety net, 28 per cent of people with a long-term illness fall into poverty and one third are living in poverty within a year of leaving work.
As Demos suggests, the workplace is a key channel for delivering IP. Group IP is more cost effective, more likely to cover pre-existing conditions than individual policies, and gives employees without an IFA greater access to financial protection.
What's more, there is an increasing consensus that employers have a responsibility to ensure their workforce is financially secure - pensions auto-enrolment being a case in point.
There are also clear bottom line benefits for employers. Offering long-term financial protection as part of an employee benefits package can help businesses to boost productivity, improve staff recruitment and retention, and minimise the cost volatility that comes with sickness absence.
That's why we believe Demos' proposal would be an effective one. The Pensions Act 2008 mandated employers to provide employees with access to a workplace pension scheme that meets minimum standards, including a minimum contribution level.
A similar approach to IP would significantly boost the proportion of the workforce which is protected against the financial risks of ill-health and maintain standards across the IP sector.
Our own work with Demos also supports this thesis. In a series of reports released in partnership with them earlier this year, Demos highlighted the role that IP could play in lifting the financial burden of long-term illness.
It suggested that with the roll-out of NEST - an ‘opt-out' approach to pensions that will draw the previously unprotected into a pension scheme - we consider applying a similar ‘nudge' approach to financial protection. In turn, Demos called on the insurance industry to make products simpler and more widely available, something that Unum fully advocates and supports.
The Treasury's Simple Financial Products Review is the perfect opportunity to tie these themes together and put Demos' proposed measures in place.
I hope that this latest recommendation will help to re-energise the debate, make a workplace Simple IP product a reality, and help lift the financial burden from people with long-term illness.
John Letizia, is head of public affairs and CSR at Unum
