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UK incomes go unprotected as nine in ten employees underestimate chances of becoming unable to work

  • 19 million UK employees do not have any form of income protection
  • 27% would rather ‘take the risk’ than pay for income protection
  • This comes despite recent media coverage leading 42% of employees to believe State Benefit provision will decrease
  • Nearly one in three (31%) without protection would worry about their financial survival if they were to lose their income
  • 43% would feel more valued by their employer if they received income protection or critical illness cover as a benefit

UK employees are severely underestimating how common it is to be unable to work due to serious illness or injury, according to research from Canada Life Group Insurance.

Nine in ten (89%) UK employees believe the number of people off work for more than four weeks due to illness or injury each year is between 1,000 and 100,000. In reality, the ABI estimates this figure is around 1 million. Only 10% of respondents accurately estimated this number.

More than three in five employees do not have any form of income protection (61%), equivalent to 19.3 million people. The ‘head in the sand’ approach is one of the most common reasons for not having income protection, with more than a quarter (27%) of those without a policy saying they would rather take the risk and 18% believing they will never need income protection. However, with most employees underestimating the chances of this actually happening to them, 45% of workers could be taking a bigger gamble than they realise.

This lack of protection also comes despite recent media coverage following George Osborne’s Budget proposals leading 42% of employees to believe there is going to be less funding for State benefit provision. In addition, a third (32%) say recent media coverage has made them think State benefits will be harder to successfully qualify for.
This suggests employees are not confident they will be able to depend on State benefits should they become unable to work. Growing concerns among employees about State benefits could put the need for income protection higher up the corporate agenda as demand for this type of policy increases.

A third worried about financial survival if they were to lose their income

Despite hoping they will never need it, 31% of employees without income protection would be worried about how to survive financially in the event of an injury or illness that prevents them from working, rising to 45% of workers with two children.

Cost is the primary factor for not taking out an income protection policy, with 44% of employees saying they are unable to afford it. As a relatively inexpensive benefit for employers, but one that has huge advantages for staff and also aids employee retention and attraction, employers should consider adding this to their benefits packages.

If employers provided Group Income Protection (GIP) or Group Critical Illness (GCI) cover, 43% of respondents said they’d feel more valued, 41% would be relieved their income was protected and 29% would be more likely to stay within their organisation.

Half (50%) of employees agree it would be very important for them to get back to work as quickly and as safely as possible, with financial reasons the most important factor (62%), while around a quarter (23%) also said they’d get bored without a job. Many GIP products also come with rehabilitation services which enable a return to work as quickly as reasonably possible, offering clear benefits to both employee and employer.

Paul Avis, Marketing Director of Canada Life Group, comments:

“The traditional argument that loss of income through injury or illness ‘won’t happen to me’ highlights a worrying lack of understanding among UK employees. That so many people underestimate the actual likelihood by up to 1,000 times goes some way to explain why take-up of both individual and group income protection remains low. This should be the priority benefit and much more widespread.

“Growing concerns over the provision of State benefits could force GIP higher up the corporate agenda. Recent media coverage means State benefits are perceived as being harder to apply for and receive, with less funding available. Separate research also shows that six in ten (60%) people do not believe the Welfare State can be relied upon to support those in need, underlining a lack of trust in the benefits system. This only increases the importance of GIP, not least because early intervention services also provided within GIP aim to help employees back to work before they need to apply for State benefits.

“From an employer’s perspective, GIP is a relatively minor cost with major potential gains. Not only can GIP prevent valuable staff from taking long-term absence, but it’s a great way of improving recruitment and retention. Additional benefits like GIP make a benefits package stand out at a time when all employers are now – or will soon have to – offering pensions through auto-enrolment. Our research shows employees who are offered GIP feel more valued and are more likely to stay within their organisation, making this a highly valuable retention tool.”

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.