Changes to state benefits introduced by the Welfare Reform Act 2012, including greater means testing and capping, have created a potential protection gap, which leaves businesses at risk of being under-insured.
These changes have particular implications for group income protection (GIP) but the study by PMI Health Group discovered only three per cent of companies have expanded GIP schemes to provide staff with additional financial support in case of long-term absence.
“Recent changes to the Employment and Support Allowance (ESA) have put employers at risk, particularly in terms of GIP provision,” said PMI Health Group Director Mike Blake.
“If a business has made a promise to cover a proportion of an employee’s salary in the event of long-term absence but has failed to re-evaluate its GIP policy in the wake of the benefits cuts, there is a danger they could be left under-insured.
“If the promise of pay is not adequately covered by a GIP scheme, the employer will be left to foot the bill for any shortfall between the promised amount and that covered by the insurer and state.”
The ESA reforms have introduced stricter assessments for fitness to work, meaning staff considered unfit for work by GIP schemes may not be entitled to state benefits.
Of those businesses yet to re-evaluate GIP protection, only 13 per cent are considering future alterations to benefits to help staff cope with changes to state welfare.
However, the new ESA restrictions have yet to result in the widespread adoption of stricter policies for determining workplace absence among businesses.
Only 19 per cent of those surveyed have so far introduced more stringent company policies for evaluations of incapacity and fitness for work.