Planet Insurance

Incapacity Benefit (IB) claimants make up the largest group of people on out-of-work benefits in Britain. Up to 2.6 million people of working age currently receive IB. In December last year, the Department of Work and Pensions published 'Ready for Work: full employment in our generation'. In response, the Conservative Party published 'Work for Welfare' in January. The media debate has concentrated on the Conservative's proposals for the long-term unemployed, but its proposals on long-term sickness are similar to those of the Government.

The Government has announced two initiatives that aim to reduce the number of people on incapacity benefits by one million - a huge aspiration. First, from April this year, Pathways to Work will be available to everybody who could benefit. In 40% of the UK the state sector is already delivering it, but the private and independent sector will deliver in the remaining 60% of the country.

Second, from October IB will be replaced by Employment and Support Allowance for new customers. Full entitlement to the benefit will depend on all customers, except the most severely sick and disabled, attending work focused interviews and undertaking some work-related activity. If they do not, their benefit will be reduced. They will also have to take a new assessment relevant to today's workplace, for example the ability to use a computer. It also looks at people's aspirations for returning to work, their capability, and how any health-related barriers to work could be addressed.

In addition, Dame Carol Black is carrying out a review of the health of the working age population, due to be published early this year.

The determination to reduce IB claimants will provide many opportunities for private and independent providers and also for insurance companies who have their own occupational health units. It also sets a major challenge for income protection insurers and brokers. But should IP product development mirror changes in IB? If it does, it should result in better return to work rates and lower premiums but the days of "own occupation" based benefits will be over and declined claims will increase. If it does not, there will be a mismatch between qualification for IB and for private insurance benefit. And that could put tax relief for those receiving insurance payments, but not getting IB, in jeopardy. The challenge for insurers will be to design attractive products that are sustainable in this new world.

Richard Walsh is managing director of SPPR Consulting