The Role of Employee Benefits and Financial Protection

As an industry we need to rise to the challenges that are around us and focus on how we help employers build on the importance of community spirit and teamwork both in the workplace as well as in our personal lives.

Much of the focus by business leaders over the last seven months has been on rewards and wellbeing benefits, with businesses having to quickly ensure that they keep employees connected, engaged, and motivated to ensure business continuity. Now as we move towards 2021 there is a need for businesses to relook at the overall benefit packages that they provide and see if they have any gaps around some of the basics of protecting employees with financial safeguards.

Back to basics

Group risk benefits (life cover, income protection, critical illness cover) are designed to provide financial support for employees when they're absent through ill-health, when they're diagnosed with a critical illness or for their dependants if they die.

It's easy to overlook the value of such benefits during normal times, but many employers are now relooking at these schemes to understand how to utilise them to support their staff during this time. We have been asked by employers to explain how their insurances are affected by COVID-19 where they have cover in place, or to provide cover for the first time as a result of the effects of the pandemic. I like everyone else don't want to spend the rest of my life bombarded with bad news and managing social distancing and listening to the drip-feed of one disaster to the next. But want to have positive conversations about having a comprehensive benefits package in place.

Is Covid-19 covered under life cover, Income protection and critical illness protection?

Most people who have COVID-19 are expected to recover but, sadly, some won't survive. There are generally no exclusions under group risk policies, so death benefits under a group life policy should be paid. However, there may be a restriction in place for travelling against Foreign Office advice and a catastrophe limit may apply in the event of multiple deaths. For a group life policy, the catastrophe clause is likely to be invoked by this pandemic as it would be considered as one originating cause. This means that no more than a specified amount in total will be paid out for deaths attributable to the Coronavirus. However, as the catastrophe limit is usually a significant amount, for example £100 million per policy, it is very unlikely that the limit would be reached.

Catastrophe event limits do not apply to group income protection or critical illness policies.

For a group income protection claim to be valid, it must meet the terms of the policy, which includes the employee meeting the definition of incapacity and having been unable to work due to illness or injury for the whole of the deferred period that has been selected.

We don't yet know enough about the virus to understand whether people will be left with lasting complications or residual damage, but if that transpires to be the case, employees who are unable to work past the deferred period and who meet the definition of disability under the policy should meet the criteria for a valid group income protection claim. However, current logic suggests that most people who have had the virus will have fully recovered before the end of the deferred period that applies under the policy.

Coronavirus is not a specifically covered condition under a group critical illness policy but again, if the virus were to cause a complication that is a defined condition under the policy, such as kidney failure, liver failure or heart failure for example, generally, that would be covered. For a group critical illness claim to be valid, it must meet the terms of the policy, including:

• the definition for the condition outlined in the policy being satisfied; and
• the pre-existing conditions exclusion not applying to the employee

How does self-isolation impact on any Actively at Work conditions?

Actively-at-work refers to being at work as opposed to being on holiday or being away from work for any other reason. In the context of insurance, many insurance plans will only begin covering employees when they are actively at work and this does cover working remotely. Generally, an employee who is self-isolating or being quarantined, but otherwise fit to work would be regarded as meeting any actively at work requirement. For clarity, an employee who is self-isolating or being quarantined generally would not be considered actively at work if they have symptoms and have received medical advice to refrain from work.

What is the impact of furloughed pay or reduced hours?

Group risk insurers are currently working through this, but we are seeing confirmations that cover can continue at full benefit entitlement rather than based on furloughed or reduced salary level. This is provided a contract of employment remains in place, data is provided based on full salary and premiums continue to be paid on that basis.

What is the claims experience?

For the period between 1 January and 30 June 2020 the amount that has been paid to dependants of employees with group life benefits because of COVID-19 stood at almost £57 million. This represents 475 lump sum death benefit claims, plus the capitalised value of seven dependants pension claims where COVID-19 has been recorded as the primary or secondary cause of death on the death certificate or reported on the claim form. The average lump sum death benefit payment was £110,285 and the average capitalised value of the dependants pensions was £617,771. The role that group life benefit in supporting 475 families caught by COVID-19 is clearly huge (1).

The way forward

I like everyone else don't want to spend the rest of my life bombarded with bad news and managing social distancing and listening to the drip-feed of one disaster to the next. I want to feel positive and feel that as a benefits provider I want to feel that I am doing as much as possible to help to protect employees and their families. The good news is that there is plenty of benefits that are available to employers that will provide the support and protection that families need.

Notes:

1. Claims figures GRID Association and Swiss Re 2020

Wojciech Dochan

Managing Director Bravo Benefits

Provider of the SmartHive Platform

Smart Hive is an integrated, cost effective employee benefits platform that provides your employees with access to all their health and wellbeing benefits in one place. Talk to a member of our team today or book your very own demonstration.

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