Kathryn Knowles  00:05

Hi everybody. We are on season nine, Episode 13, and today is just me, and I’m going to be taking you through some of the key points of group income protection insurance. This is the practical protection podcast. Hi,

Kathryn Knowles  00:26

so I’ve did a little bit of a group one last time. So quite a few The rules are pretty much the same as the life insurance side of things. So I’ll just go through some of them ones. So again, it must be an employer and employee relationship, so we need some kind of pay relationships there to prove that the person is an employee, it is based upon and built around the company structure. So, like I was mentioning last time, you can ensure everybody in the business, but you don’t have to. You can ensure certain categories of people. But the main thing is, is that everybody who is eligible within the category that’s been defined must be covered, or else you have something which is known as anti selection. So just a very, very quick reminder to say that, you know, let’s say you have a firm and they’re wanting to ensure the directors and managers and that’s it, they’re not the whole workforce. That’s fine. Director, absolutely fine. But one of the managers is just really not pulling the weight. They’re thinking they might need to start doing some kind of consultations or some kind of performance improvement planning with the person. They’re really starting to like they’re really starting to upset people, grading people the wrong way, everything like that. It doesn’t matter if they are a manager, and you’ve chosen a category called managers, then they are going to be covered by the insurance. Doesn’t, there’s no way that we’re not including them. So it has to be, let’s say, a really specifically defined category. Now the insurance systems will give you sort of like an indication in terms of category. So they’ll say they’ll have, like, directors, managers, all of the employees. You know, all staff is an option as well. But what you can do sometimes is because not all firms are so excited set up in the same way. You might have it that you have directors, but then you could have like directors by name, but not by actual that they’re not a director, director, if that makes sense. So it might be that you contact the insurer and say, Look, we want to ensure the directors and the directors, but you know, the directors, who are literally the managing directors, getting dividends, things like that, they we want them to have their own category. And then there’s other people with the name director, but they’re not a direct director, but we still look good, you know? And then what you’ll do is you’ll just work with the insurer to figure out the best way to, sort of, like, define the categories. Because the main thing is, is that the insurer just needs to know that if they come in and need, if they’re starting out a claim, and they’re looking at like, if there was quite a lot of people who passed away that they can like, really, or any not just passed away, obviously, we’re talking about income protection this time. But lots of people who’ve been ill and weren’t able to have, for some reason, that they can clearly define who’s meant to be where and receiving what. Postcode, again, obviously has a big influence. Gender has a big influence, like I mentioned last time, insurers will do it as male or female. If you have someone that is non binary or doesn’t identify as a specific male or female gender. Unfortunately, we are going to need to say that they’re going to get this kind of insurance at the moment they would need to choose to put in if they were male or female, and certain Some insurers will have different rules in terms of how they approach it. So in the personal and business space, we would be putting down the person’s gender, whereas in the group space, not all of them. But I am aware, I think, of some insurers that they would well, definitely I’m aware, because it happened with one of my clients, where the insurer said that we had to put the person’s gender, that was they were physical at birth, rather than their actual gender. So it can be quite a sensitive conversation to have with people. So we just want to be mindful of that. So yeah, going back post COVID and influence, if it’s somewhere where they’ve already got lots of insurance in one place. So you might think of, you know, it’s like London, the big cities, um, sorry, with the the big buildings that house many, many companies. And it could be that they’ve insured as much risk as they prepare to show in that location. So it might be that you need to use another insurer. So just be, be a bit mindful of that too. And again, employ, employees abroad will influence the options in terms of the insurance, depending upon how many are outside of the UK, where they’re based. Obviously, if it’s a UK contract or not things like that, it might be that you need to look at international options. So grouping and protection, just like, in a sense, personal and when we’re looking at executive income protection, can be built in many different ways. I absolutely adore the product because, well, I think it’s just so important. I think it’s, it’s the most important protection product that we have out there. And but we can just build it and tweak it however suits people. So we can often go up to about 75% of salary and. Can include National Insurance contributions include pensions, which is brilliant. We can cover dividends with some insurers. Some insurers won’t cover the dividends. So just be mindful of that. Payments can go to retirement age. They can capped at five years. They may capped at two years. What you want to be mindful of with the ones where they cap them to a short amount of time is that they will often say something like, you know, for two years, and then it’ll change to a suited occupation definition. So it does change the way that it’s going to be the claims reviewed in terms of statistics. Obviously, the longer that somebody is off work, statistically, the harder it is for them to return to work. You know, obviously that they would, it would the they’re very likely to be very, very poorly. And you know, so if somebody has been off work for two years, it’s, it’s unlikely that they’re going to be able to come back and five years, even more so. So when people are making that decision, because obviously, the shorter the time frame that we have on terms of the how long a claim will pay for the cheaper the policy. And obviously people do like to have the policies as cheap as as possible at times, but we just need to make sure as well that we’re just being mindful to say, well, that’s absolutely fine. We can look at it this way. This makes it cheaper, but then they just need to be on top of understanding, potentially, the HR consultations that they’ll need to go through at that two year point, maybe that five year point, if they were maybe looking at terminating the policy the person from employment, just to make sure that obviously, it’s been done as as correctly as possible. Obviously, if someone has reached two years or five years and they’re unable to work still, it’s quite likely that they have developed some form of disability, or they might have developed a health condition that’s not necessarily disability, but there are certain conditions that do have enhanced employment law protection. So you can’t just fire people. You have to be, you know, really, really careful to make sure that you’re being as fair to that person as possible and helping them to reintegrate into the workplace. And so, so absolutely, having the shelter claim periods is fine, but they just need to be conscious that you know, at that point, if it does reach that point, then they’re going to go through that process. And it could be, it can be a little bit messy. Obviously, it’s not going to be a pleasant experience for anybody to go through a termination process. It could be that they’ll have to get involved in terms of, you know, getting HR, people involved in speaking to the GP, getting medical reports, things like that, very likely to all be done in line with the insurers, value added benefit services. So on the grouping protection space, there is usually some form of medical company that sits alongside them. Obviously, they are paid for by the insurer, but they are a medical company. They are their own health professionals. I did a podcast a little while ago with the health claims Bureau, so that was me speaking to somebody who sits in one of those companies and explains what they do and ultimately, in terms of their responsibilities, health is, there is where their oath lies. You know, they have to make sure that they’re doing everything for that person, for their health, yes, trying to help them reintegrate wherever possible, and giving them the options to get back to work. Because that is, that is the better option for everybody. And in terms of many different things, financially, health wise, you know, if we can get back to that point, it’s brilliant. But ultimately they will sit there, they will be giving the advice to the insurer, the advice to the company as well, to say, look, this is what you need to do to support this person. Or potentially saying things like, you know, this person is not going to be able to work. In most instances, obviously, they are going to, obviously try their best get the person back into work. There are certain conditions where, if they occur, it isn’t it probably very, very quickly going to be obvious. It’s not going to be possible, or it might be something chronic that’s developing over time, and then it’s more of a case of preparing for that time period and and trying to, sort of like maybe even adapt the work earlier on as soon as possible, to try and so this person can work for as long as possible in their role. Usually find with group IP that the deferred period is 13 or 26 weeks. So with any of the income protection style policies, especially with your company directors and anybody who can potentially be taking dividends, things like that, from the company. It’s just really important that they’re aware that I you know, really, for those that time period, they’re going to need to be starting to sort of like really, if they, if they can’t work, you know, the whole point of income protection is that if you are ill and unable to work and you’re financially worse off, then that’s when it kicks in. So if the directors are still taking their dividends and not being affected financially at all, then that can sometimes cause complications at points of claim. So ideally, if we do have a longer deferred period, we do. Want to be able to say that they’ve got those, those savings in there, and they’re also going to need to decide what to do for that first three month or six month period. You know, are they going to have the personal statutory sick pay until the income protection kicks in? Or are they going to self ensure that first three month or six month pay the person, maybe the full pay or half pay, or mix of the two, until the income protection policy kicks in, like I

Kathryn Knowles  10:23

mentioned last time, applications can be quite different between different insurers. So some of them are asking medical questions, some of them aren’t. All of the insurers can well, they all. There’s, you know, obviously there’s the insurance law that basically says, if you are aware of a known risk, that basically makes it so that you are much more likely to claim on insurance, and is probably something you need to make insurers know about. But then there’s also the rule that the insurers ask the questions that they want to know the answers to. So if they don’t ask something, then you know you just answer the truth. The answers truthfully, and you know you don’t die or anything. You don’t omit anything. You just answer exactly it isn’t if for whatever reason, your health or any other thing doesn’t pop up in the insurers questions that you don’t need to volunteer it on the group side of things, some of their insurers will say in their documents, sort of like a little caveat, saying, if you are aware of anything, then you do need to make us aware and and things like that. And some insurers will ask specifically, have you had cancer, heart attack, stroke in the last 12 months? Some of them will ask longer questions. Some of them won’t ask any health questions at all. Almost all of them will be asking about travel. That’s quite something. That’s quite consistent in terms of travel. And so we do have, again, with the grouping and protection that free medical underwriting limit, it’s usually up to about 65,000 pounds. So obviously, if somebody’s 75% salary is 50,000 that doesn’t mean they get 65 it’s to the 50,000 and they get that free cover level limit up to there. It’s just to say, sort of like if somebody 75% put them 100 then the 65,000 amounts would be roughly where the free medical underwriting limit stops, and anything above that, they would need to apply to have the extra which could involve, but which would involve medical underwriting. So obviously, things that we need to consider for that. So, so we have that the thing with grouping protection as well is in that free medical underwriting limit. We don’t have any exclusions for pre existing conditions. With most insurers, some some insurers, the way that some of these policies set up, they can do but for the majority of people who are listening, and in terms of the advisors who would be advising, it’s more likely than not that you’re going to have the option where they’re when you’re advising, that you would have the option where there wouldn’t be the pre existing condition exclusion on there, which does mean that these people will get income protection without the exclusions that we’d usually see in a personal or business space, which is really, really, really, really positive for quite a lot of people. And just to remind you as well, so over that free underwriting limit, so we’ve got that 65,000 and so we’ve got that person 100,000 so we have 35,000 short they can apply to have the additional 35,000 to get them to their 75% of their salary. Just as always, to be mindful that if that person over the 65,000 has their premium rated, or there’s exclusions, or they’re declined, then it’s unlikely that we’d be able to move the group income protection policy to another insurer after that has taken place. And in the group market, a lot of the insurers kind of guarantee their rates for the first three years, and then they change around a bit. So you often, you often are looking each year to see, right, can we get better rates somewhere else? And unfortunately, there has been some kind of a rating, then that does mean that we’re not going to be able to move it. So unfortunately, the rates would just have to be accepted if the person does want to continue on with the insurance. Well, another thing I would be suggesting, obviously, you would do this in conjunction with the company’s HR team. It might be that they don’t have a HR person. They might want to bring in someone externally to do that and chat with you. They might have a lawyer who sits in and looks at all of these things. That’s fine, too. It might be that you’re just speaking to a couple who you know want to put something in place and and they’re just taking your advice on it. What I would say with group income protection, I would generally be suggesting that it’s put as a non contractual benefit, as with any of the group policies. I’ll be saying non contractual just so that if we do have something where the company changes, we need to significantly drop the the amounts that people are insured by change insurers, or even potentially close the policy which we really want to involve but avoid. But obviously some businesses do go through financial hardship and and really need all the money they can get. And that can happen that. You know, we don’t want to then on top of whatever difficulties the business is experiencing, then also have the difficulty in terms of the employee contracts and and put that extra pressure on top of the directors. But obviously that is to each firm their own. And I’m not saying that would be the case for every firm. It would just be something that is a bit of an extra consideration, especially if you do have a very small firm who doesn’t have consultants to hand, to really discuss through the pros and cons of different aspects of putting something like this in place. I mean, the pros are phenomenal in terms of like the the reason it is so good as an example, now say, before in terms of the executive income protection, you know, let’s say you have to pay a salary, somebody 5000 pounds each month for their salary. Well, something happens, and they can’t work, so then you have to decide, if they drop into statutory sick pay. Are you self funding it for a bit, or do you have the income protection policy kicking in? And the important thing is the income protection policy is that when that money comes in and is paid to the person, it means that initial 5000 pounds that’s going to that salary and to the employee in terms of their salary, which obviously doesn’t even account for pensions and I and everything as well, to the business, that 5000 pounds is staying in the business as extra. So we could pay for somebody to come in temporarily. We could pay someone some overtime. It might just help the director. Maybe the director has to step in and fulfill that role for a bit. So then they get someone else to fill in part of their role that they would usually be doing, that they now can’t do because the time is also divided. So you know, it is really helping the business, and it’d be quite hard sometimes, because you will get people who like that whole objection handling thing, of people saying, Well, why would I pay for this for the staff when they should pay for income protection themselves? You can find that sometimes you’re not going to get past those arguments. But ultimately, this is for the benefit of the business. Yes, it’s massively benefiting the employees, but there is financial benefit to the business in the event that somebody does make a claim, and we there’s just quite a good it’s a good thing to have, and employee retention as well. You know, it’s seen as quite a positive thing as well. Because, you know, ultimately, you know, this is helping people in terms of their income. Now, as I say, we could potentially be covering national insurance, potentially pensions, was a long term things as well. And it might just be that one thing that if somebody is thinking of moving somewhere else, they might just think, well, you know, actually, this is really, really quite important, and now I’m going to stay where I am. And, you know, it’s, it’s seen as having a good corporate culture to be thinking of these things, because I say you also get access like the mental health support. Often, you can access physios occupational therapy, even before a full claim has gone into play. And that can mean a lot to people and obviously as well. Sometimes, like the access to GP services as well, which would be things that I can often, 24 hour access to video consultations with GPS, who can step in prescriptions, start to trigger consultations if something else happens, which is obviously a really good thing. So in terms of an example of an income protection policy group income protection policy, because obviously I do like to give my examples. So we had somebody, there was business consultancy, 15 lives. We had the managers on 75% salary, 13 week deferred periods on own occupation, a claim to state pension age. We then had all other employees covered, and they were on 50% salary. But everything else was exactly the same because of the size of the business, because it was 15 lives, and the insurer that was used at the time, the free cover level limit was actually 41,000

Kathryn Knowles  18:42

in terms of the salary, a free cover level limit due to the size and fortunately for for this size company, that actually meant that everyone was actually within that limit. So that’s good. And that was 79 pounds per month for everybody, and paid for by the company, offset against corporation tax, which is is obviously a benefit for anybody who is familiar with the pricing of income. Pricing of income protection, you’ll probably think that’s that’s pretty good price, even for like, covering one or two people personally. So it can work quite well. What I would say with this company is that the 15 lives were all around, sort of like your 20s, 30s level. I think we were maybe sort of like some getting towards the 40s, but I think it was mainly mid 30s to, sort of like late 20s, which meant that the pricing was quite low if you do have, as with any of the Groupons, if you do have somebody older than, sort of like that, that pricing can really jump up. And I did actually have a look at another case study. Just reminds me when I was looking at potentially presenting this. And it was a company where the monthly premium was about, well, I can’t remember exactly what the monthly premium was, but most people were anywhere. Well, there was one person that was 25 pound a month in terms of the pricing included in the total. Another person was maybe a couple of 100 pounds a month, again, due to age. But then you have the. People who were, like, more towards the 60s, that were a little over 1000 pound a month each for being covered by the policy. So, you know, that just shows a little bit of an example of, you know, it can really jump and change as to that pricing. But the bigger the company you are, the more it will be that they the insurer goes to, like, average age, age, which means that, you know, they’ll, they’ll price it more upon the average of the whole team, rather than individually costing everybody. And which does make it a lot better. So for some firms, it might sound counter intuitive, but you know, in terms of, like, the the cost per person, it actually works out a lot better for them to ensure more of the workforce than less of the workforce. So I hope that’s been useful, and thank you for listening. Everybody. Next time Matt Brown will be back with me and we’ll be talking about hepatitis and protection insurance, as always, visit the website. Practical hyphen, dot, protect zone up, dot. Practical hyphen, protection.co.uk, to access any of the episodes and your CPD certificate. Thanks to our sponsors, the Okta members. Thank you very much, everybody. Bye, you