Whereas with individual protection, the product, benefits and any supporting services are owned by the employee and can be adapted as life changes, as mentioned earlier.
So considering that people move jobs, maybe frequently, having and then losing group cover might be considered a challenge. We will therefore consider this in more detail under the next header.
What are the challenges for each?
“Portability of cover is an interesting topic. We know it was offered by some firms many years ago, but it isn’t now [for reasons unknown],” says Swiss Re technical manager and vice-president Ron Wheatcroft.
Further investigations revealed that continuation options used to be available on group life. Moxham explains: “You could take out an individual [life] policy on no worse terms when leaving your employer. Employers had to pay extra to have this included as an option within their group policy. It was a significant loading of around 10 per cent.
“To be honest, I only processed one of these in 30 years. Employers didn’t use it — they didn’t want to pay the extra. And, as far as I’m aware, it wasn’t offered on group income protection.”
McLoughlin adds: “When someone joins a company with group income protection in place, and they already have individual income protection cover, I don’t always advise them to cancel their individual cover, not immediately at least.
“I’d advise that they wait for their probation period to pass, to decide whether they want to stay in the job. Also, to check the group cover terms and conditions. It might be 50 per cent salary protection or a one or two-year policy.
“Also, I put a caveat in that if you do leave and you’ve given up your individual cover, there’s a potential issue in that only around 11 per cent of the UK workforce is covered by group income protection, so it’s unlikely the next employer will have it.”
Similarly, Morgan says that because of the potential loss of cover — also the ability with individual cover to flex the plan design to meet needs and to enjoy guaranteed insurability options — “it’s important to have individual protection as well”.
That said, he acknowledges there might be a cost issue where individual cover is concerned, due to the underwriting journey.
Opportunities for intermediaries
Is there an opportunity here for advisers to catch people as they leave their employer, to help highlight what they might be losing and help them consider their options?
Income Protection Task Force co-chair Katie Crook-Davies thinks so. “There’s a huge opportunity for intermediaries and insurers to support employees through a transition such as this, and the benefits are obvious for the individual. But I think there are also clear benefits for the advisers and insurers, who can establish longer-term relationships with their existing customers and introduce potential efficiencies in terms of application and underwriting.
