Think Tank

Alex Broad: The theme for today's discussion is, who should pay for protection.

John Ritchie: To help us get under way we might need to define our boundaries ' what is in scope and what is out. When you think about protection you think of life and health insurance and derivatives there of. I would like to think of it slightly more broadly than that ' protection for me is probably the solutions for the consequences of dying too young, living too long, or your health failing at any stage in between.

David Cross: I think it is worth pointing out the lack of coherent logical working between philosophy on the NHS and the philosophy on incapacity. I do not find it surprising because responsibilities for these decisions are piecemeal among government departments and among policy makers, so illogic and contradiction is no surprise when it is actually different people in different groups influencing the decisions.

Rachel Williams: Do employers recognise the benefits of investing in protection for their staff?

David Cross: Evidence as to its effectiveness is very scarce. In convincing an employer to invest in rehabilitation you're faced with a straightforward economic argument, which is about investing in rehabilitation services of X will show a return on investment of Y in reduced costs associated with absence. There is a duty for all concerned to come up with sensible economic cases rather than make the case more care equals good rehabilitation, without helping anyone understand what that means in terms of their finances, be it governmental or business.

Jonathon Whiteley: So far we have spoken about the Government and employers, should individuals take some responsibility for their own protection?

John Dean: Individuals should take ownership of the potential of the protection, but the biggest thing they need to do is make provisions for their pension. We have seen how singularly unsuccessful the Government has been in getting people to protect a known certainty. Adding protection will not happen unless it is a compulsory part of Stakeholder. No-one is going to buy to protect something, if they can't see what it is protecting.

John Ritchie: Research we have done has shown that people in reasonable health and in work have great difficulty visualising incapacity, they know what cancer or a heart attack is, but the idea of disability or incapacity ' they don't really understand it. What happens in the workplace at the moment is people are off long-term sick because there is little intervention or rehabilitation, there is no model for someone brought back to work ' these are the forgotten people. The line manager stops talking to them, they are at home watching day-time television and gradually fading away .

David Cross: But the impression is not a lot of people are at home watching day-time television, they are at home doing another job and this is the cynicism that goes around.

John Ritchie: My experience as an insurer around this is that people's confidence levels collapse after three weeks. They need a fantastic amount of support, you need to bring them back on a sponsored basis so you take all the risk out of it. So maybe as well as economic arguments for an employer, you need a little bit of a moral argument there ' you need to create the motivation that they want to do it, that it is the right thing to do.

Rachel Williams: What about the role of insurance?

John Ritchie: Insurance isn't really covering the issue for employers at the moment and I think the advisers round this table would agree with that. Just transferring the financial risk does not cover the business risk, does not cover the skills wastage. Lots of people at lots of levels are not easy to replace, so paying someone off until they retire doesn't really work from a business perspective.

John Dean: I work in a medium-size company ' what incentive is there for me to provide income replacement insurance to my employees? Employees don't perceive it as a value benefit and employers certainly don't have to provide it legally. On top of that, the last thing I want is for you to rehabilitate my people and send them back ' unless they are back within two or three months.

Tim Evans: Well, the other problem the employer has got is that they want someone to do the job. The big issue if someone's off ill for however long period, for a month it can be handled, but after that a solution is needed. I think you would find it difficult to get that person off the payroll, you can't replace them, you've got budgets and all sorts of things. I think that is the employer's drive ' I still need the job done, how do I cope?

John Dean: Providing income replacement when I've got no incentive to, there are no tax breaks for delivering it, I am not getting any company or government stamp of approval. I would like to see the Government giving employers who take responsibility, who take ownership of these issues, provide a grading system, such as Investors in People.

Alex Broad: Do people understand the benefit of protection products?

John Dean: Even though the large organisations are investing a lot of money in pensions there's no government or any kind of support mechanism that makes a 21-year-old know which is the best employer. One pays £5.70 an hour and another pays £5.80 an hour ' that is how they decide.

John Ritchie: We have a flexible benefit scheme and introduced total reward statements because we were finding middle-income professionals were mov-ing to higher headline salary jobs yet the package was about 10%-15% less. If you sponsor these benefits and don't tell them the value of them of course they'll forget about it. I think employers are cottoning on to that now. I see a lot of low value packages that are brilliantly communicated and are thought much more of as good value.

John Dean: I would welcome an opportunity where the Government, which heavily taxes businesses said, 'if you provide this level of pension, benefit, protection and take on some responsibility, we'll cut your National Insurance and you'll be given a kitemark.'

John Ritchie: Are you describing a contracted out protection scheme a bit like a contracted out pension scheme?

John Dean: Absolutely. To me it's very simple. The employer takes ownership but it has to be public, across the whole workforce, it has to be guaranteed. At the moment there's no carrot for employers. At the moment the Government, the local authorities, teachers, police forces ' they all have the best protection scheme in the country ' the superannuation scheme. If someone changed those rules, this would be on the front page of the newspapers tomorrow.

David Cross: There are many employers, regardless of the vehicles they use that consider it's an essential part of the package. But it's up to employers to decide. Employers who have the where with all to make such a decision are few and far between. The idea of replacing State benefits with income protection benefits has potentially hideous implications in terms of alignments of definitions and so on. But the issue is it's up to them. I see my role as helping them make a valid business decision rather than compelling them to.

Alex Broad: Could we touch on where the opportunities might lie and how the balance of responsibility should lie?

Rachel Williams: It will inevitably come down to the individual.

John Dean: I have only recently become involved in the risk market and I am so disappointed with people's lack of understanding of the insurance products that are bought for them. When you've got such a lack of understanding and a lack of aspiration of wanting these benefits that are already provided. The best thing insurers can do is get better communication of the products they are selling. That creates an aspirational need because people start talking about them at dinner parties.

John Ritchie: We need to break that cycle and ignorance through better communication. There is a latent demand among many employers in the middle ground to add value for themselves as employers. There's marketing risk, but there's latent demand and commercial opportunity.

Bob Cheesewright: How do we change this to an aspirational product? This is what you have to do if you are going to get an individual to want to contribute. I would like to pick up on the question of legislation. When you look at income protection, 50% (or more in some sectors) of the cause of the claims have a stress management element to them. I don't think the Government are looking at it in terms of who will pay for it, it is my belief they will try to re-engineer the solution. They have done some research work about the rehabilitation techniques that reduce levels of wastage in our economy. I think the Government will want to re-engineer its way out of this solution and that's why I wondered if you want us to re-engineer the product.

David Cross: If they are going to take that approach to rehabilitation, there is no point increasing State benefits in this area. There is no point giving State support which will just undermine it, you will want to put it at a minimum level to incentivise to return to work.

Bob Cheesewright: The incentive they give the employer and individual is that they make it easy for them to respond positively ' and put employees back into a position where they are in control of their lives.

David Cross: Neither the Government nor the employer will invest hugely without a robust economic case and why should they?

Rachel Williams is editor