Income Protection ... and beyond Ron Wheatcroft, 9 Feb 2017

Agenda In-force income protection data and high level trends Self-insurance Where are the gaps in data The DWP:DH Green Paper Presenting a market–wide picture Opportunities    

Number of group income protection policies and people covered, 2006-2015 (source: Group Watch reports, Swiss Re) Year No. of insured schemes No. of people insured 2006 19,065 1,731,138 2007 18,859 1,723,960 2008 18,619 1,757,365. 2009 17,796 1,777,459 2010 17,576 1,792,038 2011 17,307 1,836,020 2012 17,224 1,963,814 2013 17,193 2,039,059 2014 17,119 2,078,536 2015 17,111 2,106,180

Disability insurance product trends (source: Swiss Re Group Watch 2016) Year Policies to retirement age/SPA People covered to retirement age/SPA 2011 88.3% 74.4% 2012 86.8% 70.8% 2013 85.8% 70.0% 2014 84.4% 67.4% 2015 83.1% 63.4%

Other workplace benefits provided on disability Employer self-insured arrangements, such as the public sector, large employers Number of people covered is unknown Swiss Re has estimated on a conservative basis that the number of people covered is around 3m, i.e. roughly the same as the number of people insured via a private policy or through an employer scheme

Number of individual income protection policies, 2006-2015 (source: ABI) Year No. of people insured 2006 1,418,000 2007 1,365,000 2008 1,345,000 2009 1,223,000 2010 1,381,000 2011 1,283,000 2012 1,263,000 2013 1,185,000 2014 1,100,000 2015 1,129,000

New individual IP sales split by duration of limited payment term, 2014 – 2015 by volume (Source: Term & Health Watch 2015 and 2016, Swiss Re) Product  2014 2015 % Change 2015/2014 IP to “retirement age” (excluding LPT) 63,339 66,167 4.5 Income protection 1 year limited payment term 2,200 2,383 8.3 Income protection 2 year limited payment term 17,329 33,271 92.0 Income protection 5 year limited payment term 9,402 2,360 -74.9 Income protection 'other' limited payment term 4,619 3,121 -32.4 Majority written to "retirement age" but 38% of new IP business is written on a limited payment term basis (34% in 2014).

Insured IP benefits in force at end 2015 (sources: ABI and Swiss Re) Individual income protection benefits in force totalled £14,711m pa (note that these are tax-free in payment) Group income protection benefits in force totalled £65,080m pa (note that these are taxed as earned income) Self –insured – if we assume that the average self-insured benefit mirrors insured cover, this amounts to approximately £100,000m pa STIP?

Improving Lives, The Work, Health and Disability Green Paper, October 2016 A disability or health condition should not dictate the path a person is able to take in life – or in the workplace. What should count is a person’s talents and their determination and aspiration to succeed. We know that the right type of work is good for our physical and mental health and good health and support helps us in the workplace. …..we are committed to halving the disability employment gap and share this commitment with many others in society. Change will come, not by tinkering at the margins, but through real, innovative action. Source: Ministerial foreword: Improving Lives, The Work, Health and Disability Green Paper, October 2016

The financial case for supporting people back to the workplace where possible – links to the Green Paper The total annual cost of long-term absence to the private sector could rise from £4.17bn in 2014 to £4.81bn in 2030. When the public sector is added, the costs over the same period rise from £6.71bn to £7.60bn. Factors that could influence this include changes to the make-up of the workforce, including increases to the number of older workers. Source: CEBR on behalf of Unum An annual direct financial benefit of £74m can be attributed to rehabilitation through Group Income Protection. Additional quantified indirect benefits for employers were found to be worth around £35 million. A pound spent on rehabilitation on group scheme claimants can bring savings of £16.80 Source: EPC on behalf of Zurich

The extent of the IP shortfall across EU markets Disability Gap using 60% income replacement ratio

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