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The Actuary The magazine of the Institute & Faculty of Actuaries

IFoA call for auto-enrolment style scheme for income protection products

The Institute and Faculty of Actuaries (IFoA) has announced today that an auto-enrolment style system should be introduced to increase the take-up of income protection products.

Products provide "safety net against unexpected loss of earnings" ©Shutterstock
Products provide "safety net against unexpected loss of earnings" ©Shutterstock

They believe that this could reduce state expenditure on out-of-work benefits, and allow funding to target those who are most in need of additional support should their health stop them from working.

This development is in response to the government’s green paper seeking views on how to improve employment prospects for people with disabilities and long-term health conditions, published last October.

IFoA president, Colin Wilson, said: “The advantages of income protection products are clear – they provide an effective safety net against unexpected loss of earnings.

“We believe the government should do more to increase the uptake of these schemes. This could range from communicating their advantages to employers and employees, to instituting a pensions-style auto-enrolment scheme with the ability to opt-out, to expand coverage.

“This would allow a reduction in state benefits expenditure and the redeployment of these savings to those with the greatest need.”

The IFoA announcement comes after research from the Group Risk Development (GRiD) earlier this month showed that 45% of industry leaders in the group risk protection sector believe that perceived cost is the main barrier to large corporates offering income protection.

It showed that, of the employers who did not offer group income protection, 26% thought it would be too expensive and 60% thought it would cost more than it does.

GRiD spokesperson, Katharine Moxham, said: “When cost is put forward as an issue, what employers are really saying is they don’t understand the value. The value is there to be had and it is important that it is communicated.

“We need to move the conversation on from cost and talk about value. Employers that make use of group income protection can’t sing its praises highly enough, and the findings show us that as an industry we need to do more to talk about the great value that group risk financial protection provides.”