APPENDIX 17
Memorandum submitted by the Investment
and Life Assurance Group (ILAG) (EDP 26)
1. The Investment and Life Assurance Group
(ILAG) is a representative body for the financial services industry,
with the main weight of its interest in the unit trust, friendly
society and life assurance sectors. The Group was formed in 1972
and has a growing membership of around 40 companies. In addition,
a number of associate and individual members including consulting
actuaries, pension lawyers and accountants are affiliated to the
Group.
2. Its committees are populated with experts
from specific fields within the industry. The Health and Protection
Committee, which coalesces the member's experience and views on
matters related to all Health and Protection issues in the financial
services field, makes this submission. Consequently, there is
considerable experience within the Committee of contracting in
Income Protection benefit, rehabilitating claimants and encouraging
return-to-work. ILAG members have particular experience in this
area and are happy to provide oral evidence to the Committee.
3. An Income Protection policy is a long-term
product available for purchase to replace income lost through
being unable to work due to illness or injury. The customer, subject
to earnings-linked maximums, selects the level of benefit payable.
The maximum level of benefit is usually 60% of gross earnings
at policy inception, which is paid, free of income tax for as
long as the customer is unable to work and is below retirement
age.
4. Because of the close correlation between
the issues surrounding state Incapacity Benefit and private Income
Protection insurance, IP insurers have for some time been working
alongside the Department for Work and Pensions and other government
agencies to share expertise and see how we can help each other.
IP claimants are also eligible for Incapacity Benefit so the way
in which state benefit claims are handled can have a direct impact
on insurers' experience. Similarly, because insurers are typically
dealing with much higher levels of benefit, it may be more cost-effective
for the insurer to pay for some services in order to fast track
a claimant back to work than would be possible for an IB claimant.
In this way both areas can help each other.
5. For many years, through more careful
claims management, insurers were much more successful than the
state in returning claimants to work and indications are that
this is still generally true. However, in our view, state agencies
have made considerable strides in this area in recent years and
have either adopted (or are about to adopt) many of the techniques
employed by insurers (eg earlier intervention, a more personalised
approach to each claimant, closer monitoring procedures' a more
innovative approach to rehabilitation and rewards for returning
to work).
6. In some ways, because of the much greater
number of claimants that it handles and the lack of competitive
considerations, the state is able to try out new ideas and conduct
statistically valid trials much more effectively than the private
sector. There are genuine benefits for both parties in sharing
expertise. However, it should be appreciated that whilst the causes
of claim are very similar and there is a similar hunger to identify
cost-effective services that help claimants to return to work,
insurance claimants tend to be from higher income groups and possess
a greater range of skills to work with. On the one hand, this
can be a benefit to claims management because they can be more
motivated to return to work. On the other hand, they are receiving
a much higher level of income and, having paid premiums to fund
benefits if they cannot perform their own occupation, they can
be more selective in terms of the type of work to which they are
prepared to return.
7. In responding to the specific questions
raised by the Select Committee ILAG wishes to demonstrate its
ability and readiness to assist the government in developing and
implementing an equitable and meaningful solution to the increasing
numbers of Incapacity Benefit claimants. A number of ILAG's member
companies also have significant experience of practice outside
the UK, which is partially reflected in the response to the question
relating to other countries' experience in tackling the growth
in claimants of incapacity related benefits.
8. ILAG feels, however, that one must be
cognisant of what the reasonable target for people with disabilities
in work is. It is not realistic to aim to attain the same levels
of employment for those with disabilities and those without. The
pool of potential workers is reduced for the following reasons:
— 16% of long term Incapacity Benefit
claimants have disabilities so severe that there is no prospect
of returning to work;
— those disabled from childhood, or
who have otherwise never worked, are precluded from claiming Incapacity
Benefit; and
— a number of people will have adequate
private provision (through enhanced pensions [represents 10% of
pension annuities currently written] or Income Protection insurance)
and so would not be looking for assistance from the State in returning
to work.
9. In addition, disabled groups often reflect
a different segment of society in terms of their age and skills
profile and if DWP are to be set any meaningful target for workers
with disabilities, statistics for able-bodied groups need to be
similarly weighted.
10. ILAG welcomes the recent DWP publication,
"Pathways to work: Helping people into employment".
This proposes earlier intervention, better provision of job related
services at Jobcentres, better training for GPs in the importance
of clinical management aimed at returning people to work, financial
incentives for claimants, pilot programmes aimed at the major
causes of sickness absence and best practice guidelines for employers
to help them manage this process.
11. To complement this we would also support
the formation of an Action Group made up of individuals across
the spectrum of experts and interested parties, including health
and social care groups, insurers, employers and unions. The role
of the Group would be to champion development in their own sectors,
support the government in the development of a robust approach,
and test new approaches in a controlled environment.
12. In addition, we would like to see an
education programme for all health professionals to develop awareness
of work issues throughout the NHS, thereby raising the profile
of rehabilitation in the health sector and the creation of best
practice standards against which providers of services can be
assessed.
13. It also feels that it is paramount that
"the 80:20 principle" is observed—ie concentrate
on the areas that will have a major impact on disability claims,
such as musculo-skeletal conditions, stress/mental health related
conditions and cardiovascular impairments.
14. Do the high numbers claiming Incapacity
Benefit represent hidden unemployment?
Inevitably there will be hidden unemployment
in the high figures of Incapacity Benefit claimants. In addition
to the changing skill-base requirements of today's market (requiring
re-training for many of the potential workforce claiming IB),
over half (52%) of IB claimants were previously unemployed. This
is compounded by the GP certification process, which does not
provide an effective method of distinguishing between those with
disabilities who are capable of working, and those genuinely unable
to do so.
15. What is, or should be, the role of Jobcentre
Plus? Are they doing enough actively to engage people with disabilities
in finding suitable work? Are initiatives such as WorkStep successful?
The many new initiatives introduced by the metamorphosed
Jobcentre Plus are still in their infancy and must settle down
before one can gauge their effectiveness. In particular the use
of work focused interviews and occupational psychologists in the
development of action plans are seen as steps in the right direction.
16. The New Deal for Disabled People: have
the lessons been learned from earlier pilots? How might it be
made more effective?
The earlier pilots were certainly well intentioned
and identified some valuable approaches to getting people back
to work, but more recently, the practice of using the "placebo"
of random assignment to the pilots has limited the ability to
measure results on any basis relevant to live implementation.
For the same reason, these pilots may also fail to attain critical
mass through lack of support from claimants and employers and
become exercises in theory rather than realism.
17. The role of the private sector in delivering
employment services for people with disabilities and health problems.
There have been significant private sector providers
involved in the NDDP schemes, and, as mentioned previously, this
is an area in which the insurance industry has been happy to share
its expertise, particularly concerning early intervention in disability
and rehabilitation at work. The insurance Industry has learnt
a great deal about adopting new techniques such as using telephone
rather than written contact with claimants. This serves as a two-headed
tool in that it provides an early fraud check ("No, they
can't come to phone—they're at work"), plus provides
a less threatening environment in which we have seen substantially
larger levels of truthful disclosure. The role of the employer
in continuing to maintain a link to the workplace for absent employees
has also been shown to be important.
18. Are the needs of particular groups of
people with disabilities and health problems adequately catered
for? Should employment projects be more inclusive and adapt to
individual need rather than be aimed at people with specific disabilities?
It will never be possible to say that more can't
be done, but it is of paramount importance to observe the 80:20
principle and concentrate on the areas which have the greatest
impact on disability claims. These are well-known to be musculo-skeletal
conditions; stress/mental health related disorders and cardiovascular
impairments.
19. Once sound protocols have been developed
in these areas, they can be utilised across the board. It will
be important to resist the clamour to address every single cause
of disability and effect an approach that has high impact.
20. The tax credit and benefits system: is
it too complex for the circumstances faced by people with disabilities?
Should it be reformed to reduce financial disincentives to find
work?
We see the proposal to reward a return to work
as valuable. It reflects the private sector approach and allows
the claimant to ease back into a working lifestyle. The tax and
benefit system is too complex, and finding a means of effectively
getting across the concept and aims of the Return to Work Credit
to claimants may well muddy the tax and benefits water further.
21. How does discrimination hinder the employment
of people with disabilities?
We believe that discrimination is not overt,
and is more likely to affect the recruitment process than "subsequent"
disability. Employers have a desire—and indeed need—to
get the maximum possible from their staff, and can often ill-afford
to "carry passengers" of any sort. Having invested in
experienced staff employers will not want to lose the benefit
of their training, experience and contacts. Employers will want
to make whatever adjustments are reasonable to retain staff but
may be less happy to take on an unknown person with a disability
if there are applicants who appear more likely to make a success
of the job.
22. "Discrimination" can be fairly
time dependant. As a claim progresses, employers will either need
to back-fill to ensure the role is covered, or discover that they
are able to function more efficiently without the additional head
count. Add to this the fact that the claimant will begin to settle
into a non-working lifestyle and have doubts about his or her
own ability to return to a system of work that is likely to have
changed in their absence and the different parties' agendas begin
to change. We have found that early intervention and support with
realistic action plans are key to successful vocational rehabilitation.
23. It should also be recognised that the
depth of knowledge and the amount of resource necessary to handle
such situations vary enormously from employer to employer. For
many small firms an employee on long term sickness absence will
be a unique occurrence whilst larger corporates who see this on
a reasonably regular basis will have protocols established and
a permanent resource to handle it. For this reason we support
the proposals from DWP to provide employers with best practice
guidelines on how to manage health problems and a simple absence
management system for them to identify and prevent ill health.
24. What effect does the Disability Discrimination
Act have?
The real power in the DDA is the fact that it
reminds employers (and their insurers) of employers' responsibilities
to their employees. To make the most of this reminder, active
and continued contact between the employee and employer is required.
Many commentators feel that it has been effective
in helping people without placing a crippling burden on employers.
The success has been built upon a practical and cost effective
interpretation of what is reasonable. We must take care to retain
this balance.
25. The DDA, quite rightly, is there to
protect the disadvantaged and we would entirely support that.
However, in our experience, disabled people and groups that represent
disabled people, display many different attitudes towards disability.
For some, the major priority is to ensure that they receive the
benefits and services that they are entitled to as a consequence
of their condition. For others, the major priority is to use every
means possible to overcome their situation and resume as normal
a lifestyle as possible. Both points of view may be equally valid
but, in our experience, motivation is a key factor in determining
whether a claimant will or will not attempt to return to work.
26. What experience do other countries have
in tackling the growth in the numbers claiming incapacity-related
benefits?
It is difficult to directly compare the UK experience
to that of other countries because of the differing health and
welfare systems. Most countries have seen increases in disability
absences and have looked at, or are looking at, ways to address
this.
27. New Zealand in particular has made a
number of advances, with caseworkers assigned to claimants to
facilitate their return to work. As with the UK insurance sector,
early intervention plays a key part in the success or otherwise
of the action. Interestingly, this was privatised and later brought
back into State management.
28. Finally, we would add one further overriding
issue not covered by your specific questions. As time goes by,
we (in both public and private sectors) are becoming more adept
at identifying management techniques and specific services that
will assist a claimant's return to work. However, identifying
the solution is only one part of the equation, the resources to
deliver that solution have to be available and many of the services
required are in short supply eg occupational therapists, physiotherapists,
occupational health physicians, rehabilitation experts and job
retraining experts. The issues that we face with sickness absence
will only be resolved if we can marry innovation, best practice
standards and resource to deliver this.
Sue Rice
Technical Administrator
6 January 2003
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