Disability benefit cuts ‘boost for group risk market’

500,000 set to lose disability benefit over three years

Government plans to overhaul disability benefits present an opportunity for the group risk market, according to provider Canada Life Group Insurance.

The Department for Work and Pensions plans to scrap the Disability Living Allowance (DLA) and replace it with a new benefit – Personal Independence Payment (PIP) – which it says will be a more ‘active and enabling’ benefit that prioritises support for those most in need.

An impact assessment of the changes published earlier this month reveals that there will be 500,000 fewer recipients of PIP by 2015/16 compared to how many there would have been under DLA.

The DWP estimates this will result in cost savings of £2.24bn over the three-year period.

A DWP spokesperson said: "DLA is an outdated benefit with £630m of overpayments and the vast majority of people getting the benefit for life without systematic checks to see if their condition has changed. 

"We are replacing DLA with PIP and introducing a new face-to-face assessment and regular reviews - something missing under the current system. Under PIP support will be focused on those who need it most, with a greater proportion getting the higher rates compared to DLA." 

Paul Avis, sales and marketing director at Canada Life, said this further confirms the current movement towards the reduction or removal of state support and benefits.

When taken alongside other welfare reform such as changes to Incapacity Benefit, the move from DLA to PIP has significant implications for the group risk industry, he explained.

Avis said: “As a result, we would expect to see an increase in both group and personal income protection policy sales as people realise that state benefits are becoming more difficult to qualify for and do not provide as much financial assistance as income protection.

“It is becoming even more important that advisers understand that personal and group income protection insurance is a priority, rather than a peripheral, part of personal and corporate financial planning.  It is vital that people have a security net in place, to ensure that both they and their family are provided for in the event of an illness or injury.”

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