Following last month's groundbreaking new age discrimination legislation, employers must reconsider their group IP strategies with a view to keeping staff in work. Wojciech Dochan explains
People are invariably the cornerstone of a business, so ensuring their effectiveness in the workplace is a key component of a company's success. Meanwhile, in an increasingly competitive world, companies have to look at new ways of managing the costs of doing business.
Legislation, in the form of the Disability Discrimination Act, means firms can no longer simply allow individuals to remain off work or allow them to leave employment. Employers have statutory obligations and should take advice and guidance from professional advisers to ensure compliance with the Act, with a duty to make reasonable adjustments to premises and working practices if not doing so would put their employee at a substantial disadvantage.
Set against this background, the UK is experiencing a tightening labour market, especially for skilled workers, due to a changing demographic profile. There are now around 30 million people in employment and the number of business enterprises has risen from 4 million in 2003 to 4.3 million in 2005. However, the ageing UK population means there will be more people than ever aged over 50 and working.
Age-related issues
Going forward, employers can no longer rely on young people as a ready pool of labour and productivity will depend increasingly on the recruitment, training and retention of older workers. Offering more flexible opportunities for work and retirement will be part and parcel of this and will include the taking out of income protection (IP) plans from insurance companies. And this became particularly important with the onset of the new age discrimination legislation, which came into effect on 1 October this year.
As a result of the new age discrimination regulations, firms of all sizes will need to consider how they are going to support and help manage the health and wellbeing of their own ageing workforce. Already, there are more than 1.3 million workers aged over 65 in the labour market as reported by the Financial Times. In fact, a recent survey by the Chartered Institute of Personal Management found that more than 70% of interviewed employers will be recruiting people aged between 55 and 64. Some 31% said they were trying to attract people over the age of 65 to overcome recruitment shortages. Therefore, more organisations should be looking to take out group IP plans because some insurers build support into the package, provided through rehabilitation, which can help reduce the length of time that a person is off work.
The underlying risk of not being able to work from a long-standing illness remains at one in five of the working population, reports the Office of National Statistics. At the start of the 1980s there were fewer than one million people claiming incapacity benefit, but by the mid-90s that number had risen to over 2.3 million. Nonetheless, only 6% of the UK adult population is covered through group IP.
However, even when an employer has invested in a group IP policy, insufficient understanding of absence management practices can limit the effectiveness of it - particularly with early identification of likely absences, absence patterns, and the ability to succeed in securing a stable premium for the scheme.
Work shift
With the shift in the demographic age profile of the UK population there has been a shift in the profile of work. There has been a change in employment away from manual work to more sedentary occupations and along with this has come a move away from illnesses that have traditionally caused long-term incapacity.
This means that we have far fewer serious musculoskeletal disorders as a proportion of claims, which were clearly problematic in manual jobs, and we now see that most people become incapacitated by what are termed 'common health problems' and 'common mental health problems'. These terms cover musculoskeletal problems, such as back pain, and mild-to-moderate mental health conditions, like anxiety and depression. From as early as 2002, industry analysts were reporting mental ill health and stress as the biggest causes of long-term absence.
Over the past five years, the overall claims rate for group IP has stayed the same, relative to the number of lives insured. That is to say, the same number of people have claimed as a ratio to those insured. The reason for this is there have been no new illnesses or specific medical breakthroughs; while there has been an increase in depression and stress this has been offset by a decrease in cardiac and musculoskeletal or arthritic claims.
The claims durations are also about the same; people are not getting better quicker or remaining ill for longer. And the cost of claims has only increased in line with the increase in the benefit that is insured; the increase has largely resulted from annual pay rises. At the same time, in terms of this experience, the industry is not seeing any changes in non-disclosure or any increase in declined claims.
It is now generally accepted that the longer people remain off work, the harder it becomes to get them back. Therefore, a proactive approach early on in the illness is vitally important as it significantly increases the chances of a successful return to work.
Yet, despite the improvements that have been witnessed in the health of the nation in general, people are still subject to developing serious medical conditions, such as cancer, heart failure and stroke. However, the majority of IP claims do not come from people with serious medical conditions of this sort. Rather, they arise from common health problems where an understanding of the underlying medical condition, while important as a starting point, does not necessarily explain why someone remains absent from work.
That is why some of the leading insurers offer vocational rehabilitation services.
Medical rehabilitation was originally designed for severe medical conditions and remains an appropriate approach for many of these medical conditions, where a reasonable degree of recovery needs to take place before rehabilitation starts. This form of rehabilitation is concerned with helping people to live independently and as normally as possible. However, the goal of these efforts is not necessarily return to work, but rather a restoration of function and day-to-day living.
In contrast, vocational rehabilitation concentrates on enabling a return to work and takes place at the same time as medical treatment - not later on - except in more serious cases when medical stabilisation and recovery has to take place first.
When people become ill there are a whole range of factors that determine whether they take time off work and, if they do, how much they take off and how they view the prospect of getting back into the workplace. Therefore, vocational rehabilitation, while taking into account the medical diagnosis, will equally examine the social and psychological influences at work and at home that may impact on a person's recovery and return to work. It will also look at the work and home environments to ensure the social, psychological and physical settings are appropriate and supportive of return to work.
Leading IP providers employ their own vocational rehabilitation teams as they consider this service important in managing both the frequency and duration of claims and, crucially, enabling employers to protect their investment in their staff by helping them to remain in work. This is one key area that is experiencing significant growth in the level of support that is provided by IP providers.
Wojciech Dochan is head of commercial marketing at UnumProvident
