Welfare Reform Bill

MEMORANDUM SUBMITTED BY THE ASSOCIATION OF BRITISH INSURERS (ABI) (WR 36)

1. Introduction

1.1 The ABI is the voice of insurance, representing the general insurance, investment and long-term savings industry. It was formed in 1985 to represent the whole of the industry and today has over 300 members, accounting for some 90% of premiums in the UK.

1.2 The insurance industry is uniquely placed to assist with a programme of welfare reforms.. The ABI wants to work with policymakers to help create sustainable funding solutions for the future which lead to a more resilient and better financially protected society. The ABI has been developing policy and actively engaging with key stakeholders to promote the importance of building a more resilient society, particularly through work on Long Term Care provision, protection products, such as Income Protection, and through our savings and pensions work. 

2. Summary

2.1 The ABI broadly supports the principles of the Welfare Reform Bill which aims to: simplify the current system, tackle poverty and make work pay by ensuring people keep a greater proportion of earnings when moving off benefits in to work.

2.2 There are number of ways in which we believe the Bill may be strengthened:

· Ensuring the Welfare Reform Bill is consistent and joined up with other related Government programmes, particularly: the Health and Social Care Bill; the Independent Commission on Long-Term Care; the Law Commission’s work on Adult Social Care; the Health Work and Wellbeing programme; the review of the Work Capability Assessment by Professor Malcolm Harrington and the Work Programme to be announced in summer 2011.

· Access to advice. To build a more resilient society people need access to simple and accurate advice on what financial protection is available from the State, the voluntary sector and the insurance industry, including how much the cover will amount to. This will allow people to make more informed choices so they can plan ahead to ensure they have adequate financial protection for themselves and their families;

· Provision for better financial education in the Bill. This is essential to ensuring people understand what they need to do to protect themselves and their families from unforeseen circumstances, including the cost of long-term care. We believe financial education on managing personal savings and assets should be added as a work preparation requirement.

· Improving access to vocational rehabilitation services. ABI research has shown that access to appropriate vocational rehabilitation services can cut, on average, five weeks from absence periods from employment. For more serious injuries, the number of weeks saved rises to 11. Across all cases this amounts to a 37% reduction in the period of absence, resulting in significant benefits for employers and employees alike, and potential savings for the State. [1]

3. Universal Credit

Part 1 – Universal Credit, Chapter 1, Entitlement of Awards, 12, Other particular needs or circumstances (2)(c) [2]

3.1 We note in this section of the Bill the calculation of an award of universal credit can take in to account the fact that a claimant has regular and substantial caring responsibilities for a severely disabled person. However, the definition for ‘those requiring care’ is much wider in the Health & Social Care Bill than is suggested in the Welfare Reform Bill, which only refers to caring for a ‘severely disabled person’. The Health & Social Care Bill refers to those requiring Adult Social Care as "individuals who by reason of age, illness, disability, pregnancy, childbirth, dependence on alcohol or drugs, or any other similar circumstances are in need of such care or assistance". The ABI would welcome further clarification on these definitions and we recommend consistency of language between the two bills.

3.2 The ABI believes using the terms "regular and substantial caring responsibilities" to define a carer conflicts with the definition of a carer in the Carers & Disabled Children Act 2000, which defines a carer as "an individual aged 16 or over who provides or intends to provide a substantial amount of care on a regular basis for another individual aged 18 or over". We recommend that the language between these two bills be consistent on this point. We also think there is an opportunity to look again at the age that someone may provide regular care duties.

Part 1 – Universal Credit, Chapter 2 – Claimant Responsibilities, 16 Work preparation requirement (3)(a-g)

3.3 Under this new legislation, claimants must participate in high level workplace preparation skills assessments and tasks that are aimed at helping people get back to work. We believe financial education on managing personal savings and assets should be added as a work preparation requirement so that individuals can plan ahead for unforeseen events that cause a loss of income.

4. Employment and Support Allowance

Part 2 – Working-age benefits, Chapter 2 – Employment and Support Allowance, 51 Period of entitlement to contributory allowance (1)1A Duration of contributory allowance (1)

4.1 Individuals should be provided with appropriate support structures so that they are aware of how they need to prepare for the loss of this benefit by providing:

i. Financial education on how to manage personal savings and assets. It is vital that we equip people with the financial knowledge to better protect themselves against unforeseen events that may cause them to fall back on to the welfare system.

ii. Vocational rehabilitation services to assist people back to work.

5. Personal Independence Payment

Part 4 – Personal Independence payment, Entitlement and payability: further provision, 80 Terminal Illness, (4)

5.1 The Bill states that an individual is defined as ‘terminally ill’ if at that time the person suffers from a progressive disease and the person’s death in consequence of that disease can reasonably be expected within 6 months. We urge the Government to make this more explicit by including the phrase "requiring the opinion of a health practitioner, GP or consultant" to deem the individual terminally ill, as the current definition implies self-diagnosis.

5.2 Alternatively, the ABI has recently released guidance on a universal definition for terminal illness agreed by the insurance industry. The industry definition is:

A definite diagnosis by the attending Consultant of an illness that satisfies both of the following:

a) The illness either has no known cure or has progressed to the point where it cannot be cured;

b) And In the opinion of the attending Consultant, the illness is expected to lead to death within 12 months.

5.3 We would be keen to work with Government on the possibility of having an agreed definition for terminal illness as it helps create universal responses from both the public and private sectors and decreases complexity across the system.

Part 4 – Personal Independence Payment, Entitlement and payability: further provision, 83 Persons receiving certain services (2) - (3)

5.4 Legislating to remove this benefit before the future funding of long term care has been decided by Government is risky as it will add further confusion to an already complex social care system. We understand that a White Paper on Funding of Long Term Care will be published in November/December 2011 following recommendations provided by the Commission on Funding of Care & Support in July 2011. We recommend that this section be removed from the Bill and looked at again once the Government has published its White Paper.

5.5 It is essential that people know what they can expect from the State, voluntary organisations and the insurance industry. An over-complicated social care system will not benefit customers. We need wholesale, well considered reform of the social care system. At this stage, this section of the Bill simply tinkers around the edges and adds unnecessary complexity to the system.

March 2011


[1] ABI submission. April 2009, Extending Access to Vocational Rehabilitation, A Report on Tax Disincentives for the Department of Work and Pensions Task Group)

[2] A lso see sections Part 1 – Universal Credit, Chapter 2 – Claimant Responsibilities, Application of work-related requirements, 19(2)(b) and Part 2 - Working-age benefits, Chapter 2 - Employment and support allowance, 11D Persons subject to no work-related requirements (2)(b)) and Part 3 – Other benefit changes, State Pension Credit, 73 State pensio ns credit: carers, (2)(a)-(b).