Written by Joanna Scott, Technical & Industry Affairs Manager L&H UKI at Swiss Re
We live in challenging times. Conflict, pandemic, a changing climate, an escalating cost of living … the list goes on. No wonder the mental health of many people has taken a battering.
The UK insurance industry is naturally well-placed to support people looking after their own mental wellbeing. Much of this support can be and is already to some extent delivered in the workplace, through insurance-based schemes. These are typically income protection, critical illness, and life insurance cover – offering a variety of support and rehabilitation services, such as 24/7 access to GPs, mental health counselling and employee assistance programmes (EAP).
Research conducted with insurers and employee benefit consultants by Swiss Re earlier in 2022 has reinforced the benefits of such services in the workplace. In response to the problems presented to the workplace by the pandemic, providers enhanced their services to have a greater focus on employee wellbeing. The sector is also well-placed to address the mental health and wellbeing issues presented by longer-term changes to working practices such as remote working.
Opportunities for enhancing government support
There is role and an opportunity for the government to encourage employers to do more to build on this progress. For example, EAPs are available to only a proportion of workers, not all, and even those who have access to them may not know about it. There is surely an onus on employers to tell their staff about their benefits. But even more important, the government could play an important role through measures aimed at facilitating and increasing support and access to those benefits. Specifically, ensuring that tax rules relating to group risk business are not a barrier is key.
Addressing other tax aspects can have beneficial impacts on employees’ wellbeing, given that financial issues can be a cause of mental health and other wellbeing problems. Revisiting rules governing the taxation of employees’ contributions into an occupational income protection scheme and the benefits receivable by them has a great potential for positive outcomes.
Tax rules and changes have cumulatively made this area overly complex – with the result that some employers are withdrawing the facility for members to top up their benefits themselves. This means those members may be missing out on the chance to become more financially resilient.
In addition, the treatment of income protection when used to protect rent instalments is another area of relevance where measures by the public sector could play a positive role. A discounting of some or all the payments would support greater take up of cover for the 8.5 million renters in the UK, few of whom will have any cover in place and who will consequently be vulnerable to the stresses of managing on low incomes and rising costs if unable to work.
More broadly, a good understanding of potential measures and their impact can only be achieved through transparent dialogue between, on one side, the insurance industry and industry bodies representing smaller businesses and the self-employed and, on the other side, public authorities.
Supporting the self-employed
While most insured income protection is arranged through occupational schemes, there are more than one million people who have a personal policy. These are particularly valuable for self-employed people and for those whose employer provides nothing more than statutory sick pay.
If someone has an income protection policy and is looking to claim universal credit, this will affect the amount of state benefits they get. Income protection payments are treated as ‘unearned income’.
So, for every £1 received in unearned income, the maximum universal credit payment will be reduced by £1. This would effectively cancel out any entitlement they might receive from universal credit. This can act as a disincentive to make private provision, particularly for low- to middle-earners who may lose out but cannot possibly know what their entitlement will be, possibly many years into the future.
While some progress has been made to allow income protection policies to be disregarded if the proceeds are intended to help repay a mortgage or other loan, proving that intention can be difficult if there was no documented intention at the time the policy was purchased.
This is therefore another area which deserves a closer attention from public authorities. A broader discounting could incentivise greater take up, which would in turn provide more access to the health-related services increasingly forming part of the individual product proposition.
The importance of the workplace
There will be no single solution when it comes to reducing the numbers of people who experience mental ill-health. It will require government, the public and private sectors working together.
But it is hard to overstate the value of the workplace in supporting mental wellbeing. As just one example, income protection policies alone can significantly help employees and employers to minimise and manage what is still one of the most chronic causes of mental health and wellbeing decline.