Group Insurance

Why companies buy Group Salary Continuance Insurance.

Over the years of working with advisers and employers directly, we have asked one simple question many times:

“What is your company policy as to what you will do when one of your employees has a serious health problem and is off work for an extended period?”

It is this simple question that brings to the fore all of the relevant issues that need to be considered by employers - yet they rarely make this consideration until prompted by their professional insurance adviser.  This is evidenced in the kind of responses we have had to this question over the years.  For example, some responses have been:

“We pay holiday pay and sick pay and then we have no other support.”

In other words, we have never given the problem a lot of serious thought.

Another response we have had is:

“Our employees have an insurance plan as part of the default superannuation fund.”

When they say this, we then ask how many employees are members of the default super fund?  The answer is often less than 50% of their staff.  This is not an effective solution and will become even less effective with the proposed government changes to superannuation and insurance.

It comes back to the initial question of:

“What does an insurance plan do for a company?”

If we go back to the default question we ask all employers, there is one other answer we routinely get in response, which is:

“We don’t have a formal policy, but I wish we did because last year we had:-

• an employee with cancer;

• one of the staff had a car accident;

• one of our executives had a mental health disorder and we didn’t know how to manage the problem.

It ended up costing us $…”

Having a risk management plan that can be implemented means management continues to focus on the business and is not unduly distracted with what are often very difficult legal and emotionally charged matters.  Sick and injured employees and their families will invariably look to their employer for support in these difficult times.  It is far easier to be able to give them details of an existing support program rather than delivering bad news.

On many occasions I have seen employers tie themselves in knots trying to look after staff who are genuinely ill, only to find they have been too generous and unable to easily terminate the employee when it is clear the problem is going to be long-term.

One of the biggest benefits of an Income Protection Plan is that technically an employee remains an employee for as long as the company chooses them to continue. Most injured employees do return to the workforce usually within 18 months.

Losing key staff to the open employment market because of a health issue is a very significant risk to a company.  Many staff have key relationships, knowledge of internal pricing policies or intellectual property, that placed in the hands of competitors, could be very damaging to the business. If an employer does not have the tools or resources in place to continue an injured employee’s “employed” status when they are off work, they could be handing all of those valuable insights and assets over to a competitor.  What employee would want to go back to work for the company that failed to look after them during their most difficult period in their life?

A common phenomenon within workplaces is the incidence of outside working hours events becoming workers compensation claims - sometimes successfully and sometimes not.  These might occur where things like weekend accidents are reported as “Monday morning” work accidents. Even if such claims are unsuccessful, just managing these can be very time consuming for management. Unfortunately, there will always be an element with these claims that although not genuine, end up slipping through the system and leading to increased workers compensation costs.

The most recent development in this area is genuine anxiety and depression claims turning into workplace bullying claims so that an employee can access workers compensation benefits as they have no other income benefit options. These kinds of claims are very distressing to management and staff alike and will often involve legal actions which everyone would prefer to avoid.

Having a well designed employee insurance and risk management action plan will minimise all of these significant costs to a business when the inevitable illness or injury strikes an employee.

Under workplace law, employers have specific obligations to determine the exact physical and mental state of an injured or ill employee BEFORE terminating their employment or allowing them to return to work on limited or full duties.

Having the support of a professional insurance company’s claims assessment team and legal access to their information and reports are invaluable in the company, avoiding the significant fines and sanctions that can result from not adhering to the required processes.

The reality is that if employees are unable to return to work in a reasonable period the employer will need to replace the employee and get on with business. This leaves the injured employee in a precarious financial position and the most common place they will turn to is a plaintiff lawyer who promises no fees to take their case. Given the legal requirements around managing injured employees, it is not at all uncommon for companies to make a minor procedural slip-up that gives a lawyer a sliver of a case, that will cost the company many thousands of dollars to defend, even if you are ultimately successful.

The alternative is to be able to part ways with your employee with them knowing that they have had or will have up to two years income support from the company, allowing them to keep their life in order. These employees almost never look to taking legal action against the company that is still, in effect, helping pay their bills and putting food on the table.

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