23 April 2020 - Donna McGarvie

COVID-19 Group Risk Protection Benefits Come Into Their Own

These are indeed challenging times for all of us, given the current Covid-19 pandemic. Whatever our role – parent, carer, partner, employee, employer, adviser, policymaker – everyday life and work has changed exponentially.

Employers are wading through a massive amount of change trying to keep their business going and their staff employed. Many will have faced huge technical challenges transitioning their people to home-working and many will be retaining people in new ways, such as with reduced hours or on furloughed pay. Some are even rising to a greater challenge and using their skills and resources to adapt, for instance manufacturing a completely new product line such as hand sanitiser or PPE in order to support the NHS supply chain. It’s no wonder the benefits package may be way down the list of considerations for them right now.

But that’s exactly where much help and comfort can be found: where employers can find help for themselves, their line managers and their people, plus financial support for employees and their families if the worst happens.

Group risk benefits (employer-sponsored life assurance, income protection and critical illness) are designed to provide financial support for staff at the most awful times: when they’re absent through ill-health, when they’re diagnosed with a critical illness or for their dependants if they die. The value of these benefits can often be overlooked during normal times but many employers are scrutinising these schemes at the moment to understand how to utilise them to support their staff, to understand how their insurance is affected by Covid-19, and some are even looking at introducing them for the first time.

First and foremost, the group risk industry is financially secure, has robust business continuity plans in place, models for pandemics and is able to function during this pandemic.

Employers will be working with their advisers and providers to ensure they fully understand the detail of the benefits they have, so they can make full use of them if needed and ensure they’re getting all the support available.

Some key areas for consideration for group risk policies are highlighted below but it should be stressed that this guidance is couched in general terms and the financial benefits that are paid out to employees from such schemes are based on a number of key areas, including contracts of employment and salary. So it’s vital for employers to work together with their advisers to understand their own provider’s exact stance.

Is Covid-19 covered?

The majority of people who have Covid-19 are expected to recover but, sadly, some won’t survive. There are generally no exclusions under group risk policies so death benefits under a group life policy should be paid. However, there may be a restriction in place for travelling against Foreign Office advice and a catastrophe limit may apply in the event of multiple deaths (see below).

For a group income protection claim to be valid, it must meet the terms of the policy which includes the member meeting the definition of incapacity and having been unable to work due to illness or injury for the whole of the deferred period (usually six months).

We don’t yet know enough about the virus to understand whether people will be left with lasting complications or residual damage but if that transpires to be the case, employees who are unable to work past the deferred period and who meet the definition of disability under the policy should meet the criteria for a valid group income protection claim. However, current logic suggests that most people who have had the virus will have fully recovered before the end of the deferred period that applies under the policy.

Coronavirus is not a specifically covered condition under a group critical illness policy but again, if the virus were to cause a complication that is a defined condition under the policy, such as kidney failure, liver failure or heart failure for example, generally, that would be covered. For a group critical illness claim to be valid, it must meet the terms of the policy, including:

• The definition for the condition outlined in the policy being satisfied; and
• The pre-existing conditions exclusion not applying to the member.

Does a catastrophe event limit apply?

For a group life policy, the catastrophe clause is likely to be invoked by this pandemic as it would be considered as one originating cause. This means that no more than a specified amount in total will be paid out for deaths attributable to the Coronavirus.

However, as the catastrophe limit is usually a significant amount, for example £100 million per policy, it is very unlikely that the limit would be reached. Employers should check their own specific event limit, and whether it will be applied, with their adviser.

Catastrophe event limits do not normally apply to group income protection or critical illness policies.

How does self-isolation impact on any Actively at Work conditions?

Generally, an employee who is self-isolating or being quarantined, but otherwise fit to work would be regarded as meeting any actively at work requirement.

For clarity, an employee who is self-isolating or being quarantined generally would not be considered actively at work if they have symptoms and have received medical advice to refrain from work.

What is the impact of furloughed pay or reduced hours?

Group risk providers are currently working through this but we are seeing an increasing number of confirmations that cover can continue at full benefit entitlement rather than based on furloughed or reduced salary level, provided a contract of employment remains in place, data is provided based on full salary and premiums continue to be paid on that basis.
Making things as easy as possible
Group risk providers are working through many other issues in order to make things as easy as they can for employers. This includes considering how to gather the medical evidence required to assess group income protection and critical illness claims without putting undue pressure on the NHS , digital processing, electronic signatures and concessions around premiums (for example, allowing extra time for employers to pay if delays are caused by business interruption or illness).

Other help and support

In addition to financial support, many group risk products come with a range of embedded services, often at no extra charge, including fast-track access to support for stress and anxiety, healthcare apps and virtual GPs. Unsurprisingly, these are currently being used extensively, further enhancing the value that businesses get from group risk benefits.

And finally

Like a swan, paddling hard below the water in order to maintain normality above, the group risk market is operating on a business-as-usual basis and is fully functional. It’s also a very flexible and accommodating industry. Advisers are adding a huge amount of value to employers right now, finding solutions that work for their particular business and situation: helping them to make the most of their current group risk benefits, ensure they’re utilising all the additional support that comes with them, and looking at the potential of other group risk benefits that can help them. We’ll get through these challenging times by working together.

Katharine Moxham is spokesperson for GRiD