Group Income Protection: Time to rock the boat?

With many legislative changes in the works, the group risk market is hesitant at present. Owain Thomas examines the bigger picture of what is to come for group income protection.

One of the most notable developments for the group risk sector over the past 12 months was the inclusion of an exemption for insurance schemes in the new legislation removing the default retirement age.

While this has been welcomed by all concerned, it does come with a sting in its tail that many in the industry may have missed – it does not apply to self-insured schemes.

This means that employers offering such schemes could find themselves liable for a lifetime’s worth of income protection (IP) payments or risk breaking the law by introducing an age limit for eligibility.

Any employer restricting access to benefits at a particular age on one of these schemes would need to prove that the practice could be objectively justified if challenged – something far easier said than done according to the group risk trade body, Grid.

Katharine Moxham, spokesperson for Grid, explained that the potential for serious liabilities could lead to some businesses entering the insurance market.

“It’s quite possible we will see more schemes switch to insurance rather than self-insured,” she said.

“But I think the type of company that self-insures is onethat feels comfortable around the potential of carrying on benefits to higher ages – so I’m not sure how much movement we will see.

“Also, such companies are typically larger employers that will have risk management experts in-house and will have taken the decision to self-insure with a great deal of knowledge. Quite often, they will be multi-national,” she added.

It is worth noting that this clause does not include financial services providers who are self-insuring.

Taking the brakes off

Grid has also been working on the development of an industry-wide quoting portal for intermediaries to access and submit requests to multiple insurers at once. However, that plan appears to have stalled.

“We took it as far as we could, but reached the point where it needed to become a commercial entity to progress and that is not our remit,” Moxham continued.

COVER understands that it has since been passed on to the industry to take to the next level, but has not found wide enough provider backing to do so, despite significant adviser support.

One of the challenges with this project is that some providers have already invested in their own platforms while others that have not are looking towards an industry portal.

In the absence of a consensus, Grid has released template documents for quote requests that have received substantial market support.