Coronavirus: Employment insurance policies
With many businesses focusing on income stability and business continuity, and taking on board the almost weekly changes being announced by the government in terms of support for businesses it can be easy to overlook some of the insurances which businesses have in place which they may traditionally rely on to provide benefits to employees. However, now is the time to double check how those insurances will work in the middle of the COVID-19 crisis.
There are three main insurances employers and employees may look to in these circumstances:
Group Life Assurance (also known as death in service cover)
This pays out a multiple of salary where an employee dies whilst still engaged in service to the sponsoring employer. There are currently three areas where we would recommend employers check the terms of their policy with their insurer:
a. Will the policy pay out if the employee passes away as a result of the COVID-19 infection? Although the industry as a whole has not made the position clear, some individual insurers are suggesting that in most cases this may be the case but particular policy terms should be checked, for example there may be “catastrophe limits” or force majeure clauses that would mean the policy has no effect in these circumstances.
b. How will employees who are “furloughed” be dealt with in terms of any insurances? Once of the key elements of being furloughed is that they are not engaged in any activity in relation to the business, it is unclear whether they would still be classed as being “in service” and again, if you are looking at furloughing employees you may wish to check whether or not they would be covered. For more information on furloughing see Coronavirus Job Retention Scheme.
c. Employment terms and conditions – in relation to the above two points, if your existing policies do not cover your employees what is the position of the business? In some circumstances the business could be liable to make payments of any multiples of cover in the absence of the policy paying out, this could especially be the case if, for example, the furloughed employees are no longer covered.
We would recommend you speak to your insurers and if necessary review any policies and terms and conditions at the earliest opportunity. We would also recommend ensuring as part of your contingency planning robust processes are in place to deal with any potential claims should they be made given the current extended period of social distancing and how this may impact on the information gathering.
The Association of British Insurers has said that the majority of policies won’t pay out to people for self-isolating, it will only cover situations where individuals have been advised to do so by medical practitioners and insurers are likely to require evidence like a GPs certificate or a note more widely provided by the NHS in order for a claim to be considered. In some cases, if businesses are considering standing down employees and suggesting that they make claims via Income Protection this may not be a viable route. Once again we would recommend that the terms of the policy are checked before this route is suggested.
Critical Illness Cover
This type of insurance only offers a pay out on the diagnosis of a particular illness, unless Coronavirus is specifically mentioned as one of the listed illnesses it is unlikely that this type of insurance will cover anyone off as a result. As Coronavirus is relatively new there will be almost no policies which will include this as a listed disease.
At the moment, with few exceptions, many insurers have yet to state their position in relation to various insurances, some have come out and publicly stated that the Group Life Cover will generally work, but again the above points should be checked in advance especially in relation to the furloughing. It is unlikely that either income protection or critical illness will provide any assistance to either employers or employees. In all cases any contractual terms as to the provision of benefits in these circumstances should be checked as part of the ongoing risk measures being taken by employers.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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