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Mutuals want to offer insured income protection to replace sick pay

The Association of Financial Mutuals will meet Treasury officials to explore an offer to play a significant role in government welfare reforms.

The insurers want the government to outsource some of the welfare state services to them, and that as mutuals they are a better match for government plans than banks or shareholder owned insurers.

The tentative suggestion is to offer products that sit alongside statutory sick pay and long-term invalidity benefits. They even suggest that contracting out this work would enable employers to offload sick pay costs to insurers and individuals to have sick pay schemes for their own circumstances.

On statutory sick pay or invalidity benefits, employers pay for those through National Insurance payments, with those payments being collected by the government and then paid out through their benefits system. The proposal is to take sick pay out of the National Insurance system, and allow employers to find their own insurance policies, which can be tailored to the needs of the individual.

There are a few problems with the proposal;

  • Given the choice, many employers would not buy insurance or only seek the cheapest minimum
  • Untangling a massive National Insurance system is a nightmare
  • The majority of mutual insurers are very small companies
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Mutuals want to offer insured income protection to replace sick pay
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