Group IP: The numbers are on the up

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As the number of people with group income protection rises, Thomas Smith looks at how the industry is faring.

Leighton Churchill, corporate account manager at Jelf Employee Benefits, added: "We are seeing, certainly with clients we are speaking to, interest in GIP. But cost can sometimes be a barrier.

"We will work with clients around that to look at selling limited-term policies for new-to-market, which do not turn out to be that expensive.

"Clients are quite surprised at how competitive it can be. The stigma has been that it is quite an expensive policy.

The smaller companies taking up IP will grow over the next few years as they start to introduce workplace benefits for the very first time

"Policies written to age 65 previously could be seen as quite expensive to some clients.

"When we present the options of limited term and explain the differences there, clients are often quite surprised at how competitive they are and what they get in terms of additional benefits."

 

Auto-enrolment

The continuing roll-out of AE means that many companies are already meeting with financial advisers. Among those companies, which are newly entering the market, there are different needs to consider.

While AE pensions remain a way to open the door, one change could prop open every door to protection advisers: AE for IP. For employees, this could be a boon. For employers, a second round of AE might not be so welcome. This would be a major change to the market, not unprecedented since AE came in for pensions, but still highly unusual. The idea has, however, been discussed both by the work and pensions secretary, Iain Duncan Smith, and the prime minister's office.

Across the industry, there is a variety of opinions as to whether or not AE for GIP is desirable or not. For insurers, it would mean a huge increase in business. For advisers who deal with both pensions and protection, a second glut. For those who deal solely in protection, a surge unlike anything they have ever known before.

However, there is not universal support for obliging all companies to provide GIP.

Potterton said: "It could work. I don't think it's our favoured position from the way we've thought it through. We think there are other ways the government could incentivise this kind of activity, through changes to taxation or National Insurance.

"The impact on the product will be to commoditise it more and it will go back to being a simple ‘here's some money for the event occurring'."

Bridger explained: "If we walk into AE, it should be the last thing we do to make sure that people have access to protection benefits through the workplace. There are a number of things we should be doing beforehand before AE is our only solution.

"The challenge in AE is that if you look at it from the pensions point of view, it takes seven years to get the scheme implemented. Even then, it [employer and employee contribution rates] starts very low - a one-plus-one basis of saving right now. If people think they have been auto-enrolled and are going to enjoy a strong pension and a strong retirement, they are bonkers. The pension is going to take time to build. In the same way that if you moved to AE on IP, it needs to be a benefit provision that works for everyone."

Morgan said: "We're very much in favour of the idea. Our business, a lot of what we do - we want to be able to provide low-cost, efficient products that work well to a large number of employees who have never had these sorts of products before, hence why we do a lot of new-to-market business with small companies."

Avis said: "If we go back to the beginning of 2014 when we were getting the first success figures on the pension side, it was clearly evident to me that AE for IP would become part of the wider debate. As an industry, we have never been aligned on how to grow the group income protection market and at this point in time, we are still not aligned about how to do this.

"There are a variety of options available - for example, AE for IP, reductions in National Insurance, health and well-being reported as part of human capital, tax incentives, and so the list goes on."

If AE did come in, it would still be a long time before all people in the workforce were covered.

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