Key Person Insurance Cover

If an employee crucial to the function of your business becomes disabled or dies, would day-to-day activity continue as usual or would disorder and uncertainty ensue? Would you be able to maintain the same level of business expectations and revenue stream? How will you cover for the financial loss of the employee or pay for a temporary replacement during his or her recovery? Key person insurance could help you answer these questions with confidence. It is designed to provide financial stability in a time of stress and anxiety due to the sudden loss of an important employee.

Who Needs Key Person Cover?

 Many businesses benefit from key person insurance, like those with:

• Employees who would be extremely difficult, time-consuming or expensive to replace (ex: central decision makers, chief executives and directors, vital sales managers or employees whose ideas have critical commercial impact)

 

• Highly skilled employees with unique training

 

• Employees with exclusive ties to key clients

 

• Narrow profit margins where a staff loss would mean financial trouble

 

•  A need to protect their revenue stream from loss (for example, hospitals protecting against the loss of a high-earning, respected surgeon)

 

• Concerns that a high revenue-producing client (ex: actor, writer or other entertainer) became disabled or died and was unable to perform

 

• In the event a vital employee becomes disabled or dies, this type of insurance provides the company with income to make up for financial loss or use for temporary replacement costs.

 

 

Considerations Before Purchasing Key Person Insurance

 

Estimate the value of your key employees. Think about the projects that would be lost without them, the amount of sales generated by them and the costs associated with replacing them.

Think about the amount of protection needed. There are several methods to calculate this, including using a multiple of salary or profits, payroll proportion, and the actual impact method.

Determine whether this cover is necessary and whether it is already covered under a comprehensive policy.

Create a business continuity plan that outlines how your business will function if you lose key employees. In addition to proper cover, having such a plan is vital.

 

Requirements and Cover Options

To qualify as a key person, most insurers require that the employee’s salary be in a top percentage of the company. Qualifications vary based on the insurer. All key person policies are written specifically for the employee in question. To learn about cover options, limits and other plan details, contact us at 44 (0) 20 3638 5152 to talk to an expert at In2Matrix (UK) Ltd.

Insurance for Medical Professionals

 

Medical professionals shoulder a huge amount of responsibility on a daily basis. Their job duties can sometimes even be a matter of life-and-death. Because your job as a medical professional can involve many risks, you should make sure you have robust cover to protect yourself, your business and any employees. The following is an overview of common risks to medical professionals and the appropriate cover to shield against those risks, so you can focus on helping people and gain peace of mind.

Medical professionals need insurance to help protect themselves against the wide-ranging risks inherent in their jobs, such as malpractice, negligence and other claims that arise from liabilities or a breach of professional duty. Insurance for medical professionals can cover public and private hospitals, surgeries, clinical research units, industrial and occupational health clinics, care homes and more. The breadth of protection mirrors the extensive risks.

Who Needs It?

Anyone who works in the medical profession needs to seriously consider medical professionals insurance. This includes doctors, nurses or midwives, or more specialised positions such as occupational therapists, physiotherapists and paediatricians. For some, certain covers like medical indemnity may be a regulatory requirement, so make sure you know the specific requirements for your profession.

Depending on your regulatory body, you may already be covered. For example, the National Health Service (NHS) insures most of its medical staff for the duties in their contracts. However, the NHS may not cover everything, and can render employees vulnerable by leaving gaps in cover. Whether the NHS or another health care organisation insures your professional conduct, the British Medical Association still recommends supplementary insurance to compensate for porous cover. Check your policy to determine whether it leaves you or your employees exposed.

Medical Indemnity Insurance

 A comprehensive medical indemnity policy inspires the confidence to do your job without being plagued by the stress that accompanies allegations of negligence.

A typical medical indemnity policy will cover you on a claims-made basis in the event of malpractice, breach of duty or dishonesty of your partners, directors or employees in the course of business operations. It can also provide compensation for claims and legal services, and insure against actions or omissions of your employees. Cover is usually arranged according to the specific medical profession. The following three main types of indemnity cover are organised by position:

Doctors and dentists may need to extend their cover beyond NHS’ policy in order to practise medicine in affiliation with other professional health care organisations.  Extra private insurance helps protect against liabilities outside of the workplace, such as performing charity or volunteer work or administering emergency care while off-duty (Good Samaritan acts). Doctors and dentists not under contract with the NHS will need their own medical indemnity insurance.

Nurses and doctor assistants are usually covered under their employers’ insurance, but should check just to be certain. Because patients may file a claim against employers or against nurses and doctor assistants personally, it is wise to make sure your employees are covered on both fronts.

Pharmacists will probably receive professional indemnity cover through their employers. Independent pharmacists, however, need insurance to protect themselves against a vast array of industry-related claims such as providing incorrect dosages or medications, failing to prevent adverse drug interactions or giving shoddy advice.

Additional Cover

If you are a private medical professional and have your own premises, building and equipment, consider the following forms of cover to ensure you and your business are adequately protected:

• Employers’ liability—required if you have employees
• Property damage to contents and equipment
• Loss of money
• Public and products liability
• Property damage to buildings
• Business interruption
• Personal accident
• Computer equipment
• Legal expenses

 

 

Insurance Premium Tax Hike

 

On 8th July 2015, George Osborne, Chancellor of the Exchequer, delivered his Summer Budget 2015 to Parliament. One of the most controversial and unexpected measures of the Budget was Osborne’s 56 per cent increase to the Insurance Premium Tax (IPT), a tax on general insurance premiums. Considered a necessity by the government but a surprise ‘stealth’ tax by industry insiders, the IPT increase has caused consternation and confusion. Who will absorb the increased tax on insurance, and how will the IPT hike influence premiums?

The IPT increase applies to some insurance premiums starting on 1st November 2015 and all qualifying premiums on 1st March 2016. The higher rate of 20 per cent, which applies to some policies (such as travel and vehicle insurance) will remain the same. Other policies, such as long-term insurance, insurance for commercial ships and aircraft, and insurance for risks located outside the United Kingdom, are exempt from IPT altogether.

But, retaining the occasional exemption has done nothing to assuage the industry’s fears. Although the IPT applies only to insurers, industry insiders allege the increased costs will be passed onto the consumer, resulting in higher premiums, increased pressure on the NHS and more uninsured drivers due to policies such as private medical and motor being priced out of consumers’ reach. Indeed, the Association of British Insurers (ABI) estimates that the IPT hike will add £9.48 to the average annual household insurance policy and £12.25 to the average annual comprehensive motor policy. Other estimates have been more liberal, with some experts calculating that the average policyholder will pay an extra £17.50 as a direct result of the IPT hike, and others estimating that private medical insurance premiums will increase by between 7.5 and 15 per cent.

In addition to the anger over the economic impact, some industry insiders feel ambushed by the tax hike since they had no warning. The British Insurance Brokers’ Association (BIBA) was ‘extremely disappointed’ in the IPT hike and labelled it a ‘stealth tax’. Industry insiders feel that the IPT hike is especially unexpected given the recent cooperation between the government and insurance industry which resulted in a 3 per cent reduction to home insurance costs and a 2 per cent reduction in motor insurance costs, according to the ABI. The Automobile Association (AA) even went so far as to say the tax hike is ‘underhand’ and ‘unfair’.


And most consumers agree—87 per cent of motorists responding to a recent AA survey believe that the IPT hike is unfair.

The government, however, will not concede. Osborne maintains that the tax hike will only apply to one-fifth of all premiums and that the new IPT rate is still lower than other European countries’ rates, such as Germany’s 19 per cent IPT and Italy’s 21.5 per cent IPT. Osborne is further emboldened by the government’s recent crackdown on Britain’s ‘compensation culture’, which has helped to lower premiums across the board, according to the Financial Times. Along with the IPT hike, Osborne pledged to cap charges earned by claims management companies, which insurers say encourage people to make bogus claims and thereby raise premiums for everyone.

Some experts believe that the industry will just have to endure the increase, since soft market conditions should prevent insurers from passing on increased IPT costs to consumers. But, they caution, absorbing such costs without passing them onto the consumer could lead to insurers dropping affected insurance products, thus, reducing competition and subsequently hardening the market.

One thing is for sure—the IPT hike will raise insurance costs in 2016. What remains to be seen is whether the industry will pass these increased costs on to the consumer, and, if so, whether these costs will be negligible.

Contact us to learn more of insurance industry related news

 

Why does your insurance premiums change?

The Trickle - down effect of insurance pricing

 

Insurance premiums are not direct reflections of the risks insure. While inflation is a good start for anticipating changes in your rate each year, there are still other, more subtle factors you may be unaware of that affect the cost of insurance.

 

 

Factors impacting reinsurance

 

So far 2015 has been a quiet year for catastrophes—below the recent 10-year and 15-year averages—which has boosted profits for reinsurance companies because they paid out fewer and cheaper claims. Additionally, innovative investment options have provided opportunities for reinsurance companies to generate new capital.

Having extra capital on hand means reinsurance companies can insure more people and businesses—raising the competition for customers. As a result, primary insurance companies are paying lower premiums for reinsurance, a savings they can pass along to consumers like you.

 

 

Underwriting profit

 

Insurers measure their underwriting profits with their combined ratios. A combined ratio is calculated by dividing the sum of incurred losses and operating expenses by premiums. If insurers have a combined ratio of less than 100 per cent, they are making a profit. A combined ratio of more than 100 per cent reflects a loss.
Initial reports summarising the first half of 2015 from UK insurers show that, on average, combined ratios continue to improve. A small number of catastrophic losses for the remainder of 2015, as well as new methods of synthesising and analysing consumer data, will likely lead to reports of improved combined ratios again in Q1 of 2016.

Investment Holding

Another way insurers make money is by investing policyholder surplus and cash reserves in the stock market as well as a variety of other investment vehicles. If investment returns are good, the insurer makes money.
Many UK insurers continue to report dwindling investment yields due to low interest rates, stemming from the United Kingdom’s sluggish but persistent economic growth since the 2008 financial crisis. In response, insurers are aiming to shift, grow and diversify their investment portfolios, reflected in the graph below.

 

 

Increasing interest rates 

Interest rates in the United Kingdom have been kept at historic lows since the aftermath of the financial crisis. But as economic recovery gains momentum, analysts are anticipating a rate hike sometime between the first half of 2016 and 2017. Rising interest rates are generally considered a sign of a strong economy, yet opinion remains varied on how rising interest rates will affect financial markets.



Contact us to learn more of insurance industry news


 

The Benefits of Early Intervention

Supporting employees when they need it the most.

Every business experiences sickness absence. An effective wellbeing strategy can help your staff stay healthier and help you better manage sickness absence. But there is no way to eliminate it completely – especially when it comes to serious illness or injury. While most companies know their sickness absence costs, many are unaware of how much they could save by stepping in early.

A recent report by the Centre for Economics and Business Research (Cebr) reveals that long-term sickness absence (6 months or more), costs UK businesses £4.17bn every year. This means it’s costing a typical business of more than 500 employees over £770,000 a year. It’s also a growing problem. As the make-up of the workforce changes and the number of older employees grows, this will only increase.

However, by providing access to support early on and proactively using early intervention services, businesses can reduce the length of a typical absence by 17%. For mental health conditions, the most common cause of absence, this rises to 18% - meaning an absence of 7 months would be reduced to 6 months.

The cost of long-term sickness absence

Key findings

To the economy as a whole (public and private sector)                               £6.71bn

To your business*                                                                                                £770,000

Per employee*                                                                                                    £208

To UK business                                                                                                     £4.17bn

(*more than 500 employees)

 

The cost of mental health

With an estimated 3 in 10 fit notes issued by GPs concerning mental ill health (CIPD, 2014), it’s no surprise that mental illness, including stress, is the most common and costly cause of sickness absence – amounting to a £1.17bn, a quarter of the total cost of long-term sickness absence.  It’s where early intervention services have the greatest effect – shortening the length of mental ill health absence by 18%. By spotting the early signs of mental illness in the workplace, employers can start conversations with employees and put relevant support in place – sometimes even before an employee goes off sick.

Courses such as Mental Health First Aid can help HR and line managers learn how to deal with mental health in the workplace. Other services such as Employee Assistance Programmes and Cognitive Behavioural Therapy can give employees access to tools to help them cope with or control their condition.

A growing problem

The cost of long-term sickness absence is rising - increasing by £240m over the last 2 years. And, as the make-up of the workforce changes and the number of older workers increases, it’s likely the cost will reach £7.6bn by 2030 – an increase of £890m. Employers clearly need to take action and think about not only prevention, but how they can step in to provide the support their employees need to address their illness while still in its early stages.

Sickness absence costs UK businesses £4.17bn every year. A quarter of this cost (£1.17bn) is due to mental ill health. Early intervention services reduce sickness absence by 17% - a reduction of more than an entire year for the average long-term absence of 7 years.

Group Income Protection policies with early intervention services offer businesses significant savings. For every £100 an employer spends, they get an average payback of £61. If employees actively use the services on offer, this increases to £66.

 

What can businesses do to support their employees?

To minimise the likelihood and cost of sickness absence to your business, putting a health and wellbeing strategy in place is key. While prevention is typically the focus, intervention is just as important - providing services which allow employers to step in when employees show the first signs of a health problem.

A variety of intervention services are available to employers and employees - often included as part of a Group Income Protection package.  Support on offer can range from “self-serve” information online, to telephone support, face-to-face counselling and absence case management.

Early intervention services you can use:

Employee Assistance Programmes (EAPs)

Access to information and support on work/life issues – including legal matters. Some EAPs also offer counselling services for distressed employees.

Early intervention

• Helpline

Information for employers on how to best support an absent employee – or a struggling employee in the workplace who is likely to go off sick.

• Cognitive Behavioural Therapy (CBT)

Helping employees to rethink the way they behave in certain circumstances such as anxiety or depression.

• Vocational rehabilitation services

A team of experts offering support to employers and employees – including active case management and return to work guidance. Access to rehabilitation support in the first 6 months of an absence could even help employees return back to work before they become long-term absentees.

• Mental Health First Aid

A 2-day course helping employers learn how to spot the signs of mental health issues in the workplace and how best to support employees quickly and confidently.

• Positive ageing guidance

Information and support for employees around ageing and caring for elderly family members.

• Physiotherapy

Helping employees to manage pain and introducing treatments to aid recovery.

Sources:

“The Benefits of Early Intervention” by Centre for Economics and Business Research, commissioned by Unum (October, 2015)

CIPD Absence Management – annual survey report (2014)

 

The bottom line

Not only is use of early intervention and rehabilitation services driving down the typical length of long-term absence, it is also generating an additional £270m worth of ‘payback’ to UK businesses. This can mean significant savings for companies. In fact, for every £100 you spend on a Group Income Protection policy with early intervention services, you get an average payback of £61 – the result of savings on replacement salary costs, less impact on productivity, and a reduced need for recruitment and training of new staff. If an employee actively uses the intervention services on offer, this payback increases to £66. 

It’s clear that ensuring your employees are healthy and happy isn’t just the right thing to do, it directly impacts your bottom line.  Smart businesses should consider how they can provide their employees with early intervention services, such as those you receive as part of a Group Income Protection plan. Even more importantly, they should ensure their employees know about the services available and take full advantage of them.

To read the full report, go to: unum.co.uk/early-intervention

(With thanks to Unum for their kind permission to reproduce this article)

 

If you would like to find out more about the benefits of a Group Income Protection scheme for your business, please contact:

Richard Birch FCII APMI APFS DipIEB

Chartered Insurance Practitioner

Director - Employee Benefits

In2 Matrix (UK) Ltd

101 Finsbury Pavement

London
EC2A 1RS

Tel DDI     +44 (0) 203 638 5159

Email      richard.birch@in2matrix.com

Website: www.in2matrix.com