With British soldiers involved in two major conflicts, the low levels of compensation awarded to those killed and injured has been brought into stark focus. Sam Barrett looks at the role insurers can play
Life assurance and protection are probably the last things soldiers would think about when stationed in the centre of a war zone. But with recent media coverage highlighting the paltry payouts injured soldiers receive, it is something members of the armed forces should consider.
The protection package available through the Ministry of Defence (MoD) is not the most generous. On top of a compensation scheme that only pays out for injuries and death resulting from service, there is a death-in-service benefit that pays out four times their salary.
A prime example of the payout a soldier can expect is the case of paratrooper Ben Parkinson. After he was caught in a landmine blast in Afghanistan that left him with severe brain damage, loss of speech and the loss of both his legs, he was awarded the maximum payout of £285,000.
In stark comparison, an Iraqi teenager was recently awarded £2m for being paralysed by a stray British bullet.
"The MoD package is not enough," says Al Voice, managing director of Forces Financial. "The vast majority of those in the forces are based in military accommodation in the South-East. If they die, their families will get some time to find alternative accommodation but four times their salary is not going to help them buy a house in the area. I'd recommend at least 15 times salary for someone with dependants."
Price of a life
Perhaps aware of this, the MoD does have an arrangement with Service Life Insurance to enable members of the armed forces to obtain additional life insurance. The scheme, underwritten by Sterling Life, provides up to £200,000 of life insurance with guarantee automatic acceptance and no exclusions for war or terrorism.
Arranging additional cover for armed forces personnel can be as straightforward as it is for civilians. "If they're not under orders to deploy then it's just the same as for anyone else," explains Voice. "Whether they want critical illness, income protection or life assurance, they'll pay exactly the same premium as a civilian."
They need to be careful though. Many standard life assurance policies have exclusions for war risk, so deployment to a war zone will render cover worthless if the policyholder dies in action.
Once an order for deployment is received, it does become more problematic with cover mainly limited to personal accident and life assurance. Sums assured will also be capped, with £150,000 generally the most on offer.
An example of the type of policy on offer is that provided by Pax Insurance. It offers a personal accident and optional life assurance scheme, underwritten by AIG. The maximum sum assured is £150,000 and the policy includes extras such as legal protection insurance, personal liability and critical illness cover.
Forces Financial also offers a combined product, giving 14 levels of cover from £20,000 to £150,000. This offers worldwide cover against serious injury, disablement or death and can include hazardous activities, professional sport activities and protection against loss of hazardous duty pay, such as flying pay.
Working alongside the armed forces can also result in problems getting cover. As they face similar risks, protection does tend to be restricted in the same way.
For example, specialist intermediary Pulse Insurance provides comprehensive cover to personnel working in risky areas. Its managing director Paul Sandilands explains: "We have a combined personal accident and accidental death policy that can provide cover to individuals working in close protection. This will cover them for injuries such as the loss of a limb but will also give them cover if they die, even as a result of war or terrorism."
The policy, written through the Lloyd's market, runs for a year which is generally sufficient as contracts tend to be for short periods. "We get a steady demand for this," says Sandilands.
Different pricing strategies do come into play. On some schemes, such as the one offered by Pulse, price will depend on the risk the person is facing. For example, a soldier on the frontline will pay more than someone repairing military vehicles back at the base.
Others plump for a flat rate regardless of where the person is stationed and their role. This is the case with the Pax Insurance scheme. With this, cover is sold in units, with members of the armed forces able to take out anything from one unit, at £2.75 a month for the personal accident plan and a further £1 for the life cover, to 15 units, at £41.25 plus £15 for the life cover.
But, whatever the pricing strategy, many policies will have experienced premium increases in the last few months. Voice says Pax Insurance was the first to increase its pricing, putting premiums up around 30% at the beginning of March. "It was a reaction to the experience in Iraq and Afghanistan, as claims are increasing, but we were a little disappointed that the increase was so sudden. We, and other insurers, have to follow," he adds. "If you're the cheapest you'll get all the business and the underwriters don't want to take this level of risk."
Take a chance
But while the risk of insuring people on the frontline may seem too great for many insurers, Voice says that the probability of death is not that different to the rate among civilians. "Despite the coverage of deaths in service, the bulk of claims arise from the same causes of death as among civilians - road traffic accidents and cancer. It's really not that different," he explains.
- Sam Barrett is a freelance journalist.
THE PRICE OF COVER
Pulse Insurance specialises in sourcing cover for more unusual risks and has many years' experience of arranging cover for people heading out to war zones. Here are some examples of cover it has arranged and the price:
- An army corporal whose responsibilities were to drop supplies from transport aircraft at Kandahar Airbase in Afghanistan. A 10-year policy covering death from natural causes only was arranged for a premium at the minimum premium of £35 a month.
- A security consultant protecting dignitaries in the Middle East. A natural causes life assurance policy was arranged for a sum assured of £250,000 for £35 a month with an accidental death policy including war and terrorism for a sum assured of £250,000. The accidental death policy cost £5,000 a year.
- An armed bodyguard based in Iraq and travelling frequently in a helicopter transporting engineers to and from their workplaces. A natural causes only life policy was arranged for £76 a month for a sum assured of £191,000. On top of this a personal accident plan was put in place for the same sum assured at an annual cost of £5,730.
WHAT MOD PROVIDES
Members of the armed forces are entitled to life assurance and income protection style benefits under the Armed Forces Compensation Scheme (AFCS).
An AFCS award is typically made up of two parts - a lump sum payment based on the severity of the condition and, for more serious injuries or illnesses, a guaranteed income payment, which is paid for life.
"The maximum lump sum a member of the armed forces will receive though the scheme is £285,000 but they could also receive a tax-free guaranteed income for the rest of their life with their pension on top of this," explains a spokesman for the Military of Defence.
The amount is determined by the severity of the condition, with a tariff running from level one for serious injuries such as loss of sight and hearing or severe spinal cord injury and total paralysis, through to level 15, which could include minor burns or a dislocated knee.
One important catch is that compensation is only paid out through the AFCS where the death, injury or illness is caused only, or mainly, as a result of service. This could include instances where a soldier is attacked because they are a member of the armed forces but it does not include accidents that may happen during their own free time.
A separate death-in-service benefit is also available through the pension scheme. This pays four times salary with additional pension benefits for dependants based on the length of service.
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