Select Committee on Work and Pensions Written Evidence

Memorandum submitted by the Association of British Insurers after the publication of the Welfare Reform Green Paper


  1.1  This is the Association of British Insurers' (ABI) response to the House of Commons' Work and Pensions Select Committee inquiry into the reform of incapacity benefits and the Pathways to Work pilots. The ABI will also send this submission to the Department of Work and Pensions as its formal response to the Incapacity Benefit Green Paper.

  1.2  The ABI represents the collective interests of the UK's insurance industry. The Association has around 400 member companies. Between them, they provide 94 per cent of domestic insurance services sold in the UK.

  1.3  In 2003, ABI members paid out £4.5 billion in compensation for personal injuries sustained either on the road, in the workplace or in public places. In addition, 6.5 million people are insured by their employers to meet their care, rehabilitation and income replacement needs and, in 2004, over £3 billion was paid to replace lost income and meet healthcare needs.

  1.4  The ABI welcomes the Government's proposals to reform Incapacity Benefit and roll out the Pathways to Work pilots, but further measures are needed to deliver a step change in the UK's return to work rate. The Government needs to deliver additional reforms, including a system of accreditation for rehabilitation qualifications, the removal of tax disincentives, and the introduction of tax credits for employers purchasing occupational health services. These measures would allow the rehabilitation market to grow, helping more people back to health and back to work more quickly.

  1.5  In December 2005, the ABI launched its proposals to improve the personal injury compensation system and foster a return to work culture through increased provision of rehabilitation and occupational health schemes. This document, entitled `Care and Compensation', can be found at


  2.1  The ABI supports the Government's desire to connect health and work policies, reflected in the "Health, Work and Wellbeing" strategy, the Pathways to Work pilots, the impending appointment of a National Director for Occupational Health, and the Incapacity Benefit Green Paper.

  2.2  The Pathways to Work pilots and the proposals in the Green Paper show a welcome commitment from the Department for Work and Pensions to provide incentives through the payment of benefits, support for claimants to return to work, and help for GPs to help people back to work. However, to foster a return to work culture, the Government needs to go further, and increase the provision of rehabilitation and occupational health services.

  2.3  To do this, the Government needs to harness the work of the many relevant stakeholders: the state, insurers, employers, and employees. The mutual interest of these stakeholders should be a powerful force for change. However, occupational health suffers from a classic market failure: its benefits are spread widely but the responsibility for its provision and the costs fall on only one of the potential beneficiaries. The Government must therefore improve the work of its own agencies, and provide incentives for other stakeholders to take up rehabilitation and occupational health services.


  3.1  The DWP's commitment needs to be matched by other government departments and agencies with a role to play in keeping people in work, or helping them back to work. The new National Director for Occupational Health will play an important part in coordinating all relevant agencies to deliver more effective rehabilitation.

  3.2  The National Health Service has a disappointing record in delivering rehabilitation services and its role in promoting occupational health is not sufficiently recognised. The public health white paper, `Choosing Health', and the new willingness to purchase services from beyond the National Health Service, provide a real opportunity to overcome this tendency.

  3.3  In addition to the proposals in the Incapacity Benefit Green Paper for GPs to provide more robust fitness-for-work advice, and for greater education for doctors about health and work, the ABI proposes that:

    —  the Department of Health should share the Health and Safety Executive's PSA target to reduce the number of days lost due to injuries and ill health by nine per cent by 2007-08. This would ensure a more balanced approach, recognising the role of rehabilitation in reducing absence as well as accident prevention;

    —  the NHS should introduce return to work programmes, advising its patients on how they should approach their return to the workplace.

  3.4  The Health and Safety Executive also has a key role to play. Its remit should be expanded beyond the management of risk in the workplace, to include the promotion of best practice in responding to injuries and illnesses. The ABI proposes that:

    —  the Health and Safety at Work Act should be amended to put more responsibility onto employers to provide care and rehabilitation for their employees, and to increase the Health and Safety Executive's activities in this area, for example by requiring employers to report on how they respond to injuries at work and manage sickness absence;

    —  the health and safety authorities and the Employment Medical Advisory Service should have new remits to help promote care and rehabilitation and produce return to work plans for employers.


  4.1  Those companies that purchase occupational health insurance for their employees do so because there is a rational business case for it. In the last five years, the number of corporate subscribers has increased by almost twenty per cent. The ABI advocates a partnership approach where the NHS delivers what it can (for example promoting a return to work culture) and employers and insurers deliver what they can (for example the purchase of occupational health and rehabilitation).

  4.2  The insurance industry will work in partnership with employers to develop insurance products to promote care and rehabilitation. In this regard, we welcome the DWP's commitment in the Green Paper to "work closely with the insurance industry, together with employers and trade unions, to encourage the development of products which help maximise the chance of a speedy return to work". We would like to see a similar commitment from the Department of Health in relation to their public health strategy.

  4.3  For these products to have an impact, the occupational health market needs to be better developed. The Government should encourage employers to provide care for their employees by clarifying and reforming the tax system to promote rehabilitation and occupational health treatments. Where an employer provides rehabilitation cover for its workforce regardless of where the injury occurs, this should not be counted as a taxable benefit for employees and should qualify for tax relief for employers. A rehabilitation tax credit should also be established to subsidise employers providing rehabilitation to their staff directly or through the purchase of insurance.

  4.4  Measures to ensure the quality and quantity of rehabilitation and occupational health providers are also necessary. In the short term, all stakeholders should play their part in providing financial sponsorship to deliver the specialists that will be needed. There should also be a transparent accreditation system for rehabilitation qualifications, overseen by an industry-wide rehabilitation group, and supported as appropriate by the Healthcare Commission.

  4.5  Rehabilitation also needs to play a greater role within the personal injury compensation system. At the moment, the adversarial nature of the system, and the unnecessary delays within it, mean that rehabilitation is not provided as often as it could be. The Government should implement the ABI's proposals for reform, also set out in `Care and Compensation', that would speed up the compensation process and therefore increase the potential effectiveness of rehabilitation. There should also be a new requirement in the personal injury compensation system for the claimant to receive and undergo rehabilitation where there is a clinical need to do so.

  4.6  In addition to these fundamental changes, other measures can improve the UK's "return to work culture". The ABI is working with employer and employee organisations to promote a new code of best practice to improve responses to accidents and ill health in the work place. The Government should also take a leadership role by promoting care and rehabilitation to reduce the number of days lost to sickness absence in the public sector. With regards the medium and longer term, the Government should also coordinate further research to identify how best to rehabilitate victims of accidents and ill health.

Association of British Insurers

February 2006

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