In the second in a new series offering protection non-specialists an insight into the group risk market, Steven Dean outlines how group income protection policies can offer legal support to business owners
The world of business is never short of new rules for company owners to keep track of - employment law, regulations, health and safety - the list can feel endless. Many companies do not have in-house legal support and the cost of hiring legal consultants can be astronomical.
Research by LawBite found small and medium-sized enterprises (SMEs) need legal help up to eight times a year. Taking this into account, the costs really stack up when you consider that a solicitor can charge upwards of £200 for an hour of their time.
For financial advisers specialising in protection, advising clients on how they can access legal support might seem like a difficult task on the surface and yet there is a solution that, for many, will be right under their noses - group income protection (GIP).
Some GIP policies come with legal assistance as a support service that can be accessed over the phone, online or email newsletters, for no additional cost other than the original policy premium.
The service is often provided by an independent law firm that provides advice on a number of regulatory issues that businesses may encounter. Furthermore, documents such as an employment contract can be created quickly using an online generation tool before they are reviewed by specialist solicitors.
These services can help clients keep track of legal developments that impact their employees, such as pension auto-enrolment and welfare reform. Examples of important areas where the legal assistance support service in GIP can help clients avoid costly legal expenses include:
* General Data Protection Regulation (GDPR): The overarching intention of GDPR is to give individuals control over how their personal data is used. Insurers can process the information needed - for example, salary details - to provide insurance because of the requirement to fulfil contractual obligations to policyholders. This legal basis is almost identical to how things work at present.
* Abolition of default retirement age: Since 2011, employers have been prevented from enforcing compulsory retirement for workers who reach a particular age. The group insurance industry has, however, secured an exemption to the anti-discrimination legislation to enable insured benefits to be provided to a fixed age as long as it is at least equal to the State Pension Age. The major benefit of using GIP in this way is it ensures the client does not fall foul of age discrimination rules.
* Pension auto-enrolment: A number of benefits, including group life assurance are linked to pension membership. Since auto-enrolment began six years ago, the purpose of differing eligibilities in group insurance policies has been diluted. A lot of hassle can be avoided, however, by simply providing cover to employees as standard.
* Welfare reform: State disability benefits have suffered in previous years - the amount has shrunk and they have become harder to qualify for. GIP policies were historically linked to state benefit provision, but this relationship is now more complicated and less beneficial than recent times. Advisers should, however, notify clients that by separating the two and redesigning the GIP policy around a fixed percentage of salary replacement, they can yield the benefits irrespective of further changes to state benefits.
Steven Dean is research and communication specialist at Canada Life
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