Memorandum submitted by Unum Provident to UK Government (EDP 03) From December 2002

Proof of Unum influencing Government policy?

EXECUTIVE SUMMARY

  UnumProvident has been operating in the UK for over 30 years, and is the UK’s leading provider of income protection insurance. At the end of 2001 in the UK alone, it protected over 737,000 lives and paid benefits to people with disabilities totalling some £116 million. As such, it brings a unique perspective to assist the Committee in its inquiry.

  UnumProvident believes that the current welfare, tax and benefits systems can make it difficult for disabled people to return to work. They are overly complex, can provide strong disincentives for disabled people to look for work, for example in terms of structure, payment criteria and terminology, and are in need of radical reform.

  It is UnumProvident’s contention, and our commercial experience, that acquiring or developing a disability does not necessarily make you incapable of work. In our experience, most disabled people are capable of some work, would like to work and crucially, have an expectation that they will return to work in some capacity.

  We believe that the terminology and the structure of benefits make it both difficult to look for work, and reinforce the mindset that the claimant is too sick to work. Return to work should be regarded as a continuum ranging from an hour’s therapeutic work to full-time employment. Many disabled people in receipt of incapacity benefit have not worked for a long time, and may even suffer relapses when at work. Consequently, the benefits system needs to be changed so that it is flexible enough to cope with people moving in and out of work, and adjusting the amount of work they do over time.

  The welfare system needs to be flexible enough to ensure that work always pays more than benefits and is clearly seen to. Many disabled people are put off looking for work because they are worried about the financial impact to them if they found and then subsequently lost work.

  UnumProvident believes that there is a significant role for the private sector to play in helping to return disabled people to work. UnumProvident is working on a variety of initiatives and projects which we believe will be of interest to the Committee and which might offer alternative approaches or models to the solution of encouraging and enabling disabled people back into work.

  UnumProvident would welcome the opportunity to discuss its work with the Committee in greater detail and/or provide any additional information or evidence that the Committee might feel pertinent to its inquiry.

I.   Introduction

  1.  UnumProvident has been operating in the UK for over 30 years, and is the UK’s leading provider of income protection insurance. UnumProvident is a wholly owned subsidiary of the UnumProvident Corporation, our US parent and the world’s largest provider, with assets of over US$40 billion. At the end of 2001 in the UK alone, UnumProvident protected over 737,000 lives and paid benefits to people with disabilities totalling some £116 million.

  2.  As a specialist provider of income protection, UnumProvident has a unique understanding of this marketplace, and of the difficulties and obstacles that disabled people face in attempting to return to work in some capacity. Consequently, we are delighted to have the opportunity to give evidence in response to the Committee’s inquiry.

  3.  According to the Government’s own statistics, there are over 6.9 million disabled adults of working age in the UK. [1]Less than half of them have a job. Yet of the roughly 3.6 million who do not have a job, less than 300,000 are classified as being unemployed under the internationally recognised International Labour Organisation definition. This means that around 3.25 million disabled adults of working age are classified as economically inactive. This makes them the single largest inactive group in the UK.

  4.  Helping these people return to work is key to building a society which can enjoy the benefits of sustainable growth and genuine social inclusion. However, we believe that the current welfare, tax and benefits systems can make it difficult for disabled people to return to work. They are overly complex, can provide strong disincentives for disabled people to look for work, for example in terms of structure, payment criteria and terminology, and are in need of radical reform. UnumProvident believes that there is a strong case for a fundamental review of, and reform to, the current welfare system. The Government must ensure both that work always pays more than benefits, and more importantly that it is clearly seen to do so. This is not the case at present, as our experience seeks to demonstrate.

II.   Do the high numbers of people on incapacity benefit (IB) represent hidden unemployment?

  5.  It is UnumProvident’s contention, and its commercial experience, that acquiring a disability does not make one incapable of work. In our experience, most disabled people are capable of some work, would like to work and crucially, have an expectation that they will return to work in some capacity. Indeed many disabled people would be capable of some work, albeit perhaps not enough to support themselves. We attach a series of case studies[2] which show how we have been able to work with our claimants to achieve a successful return to work.

  6.  Consequently, UnumProvident believes that the high numbers of people on IB do constitute hidden unemployment. Indeed there are over one million disabled adults who do not have a job but who want one, most of whom we would contend from our commercial experience, would be able to do some work. This group at least must surely constitute hidden unemployment.

  7.  Our commercial experience leads us to believe that there are two key developments needed to return these unemployed inactives to work. The first is to set the expectation of a return to work (and in this respect, the language around IB and inactivity is particularly important, and currently, unhelpful). The second is a requirement for a flexible welfare system that supports the disabled person in work, both financially, and through access to training and support. Both these proposals are contained in UnumProvident’s policy paper “Diversity in Employment” (not printed).

  8.  In our policy paper we propose a flexible benefit system whereby disabled people capable of some work would be placed on a form of JSA, thus reflecting their status as jobseekers and sending an appropriate signal to employers. Like UnumProvident claimants, they would move through a graduated return to work programme, supported by a flexible benefits system that allowed the partial payment of benefits. This would both protect their income, and allow them to replace benefit income with earned income, always ensuring that they are better off in work than out of it. 

III.   The role of JobCentre Plus (JCP)

  9.  UnumProvident has engaged with JCP in recent months, particularly through a joint project to launch a best practice guide for employers entitled “The Knowledge”. The guide is particularly important as it is our experience that employers who would be willing to consider employing disabled people often fail to do so because they do not know how to. The Knowledge changes all this, providing them with a good practice toolkit for the recruitment and retention of disabled people. It is to be rolled out through Disability Employment Advisers (DEAs) nationally. We have produced 8,000 copies so far, which are currently being used by DEAs and their client employers to help recruit and retain disabled people. In our dealings with JCP, we have been impressed by the professionalism of the JCP disability services teams, and their commitment to helping disabled people find and keep work.

  10.  The idea of a one-stop shop to help disabled people back into work is an excellent one. However, the journey back to work for a disabled person can be long and complex. It may take them through interactions with the health service and through education and retraining. They may also have to cope with the barriers to work present in the transport system and at the workplace. Understanding the unique needs of disabled people at each stage of this journey, to help get them back to work and crucially, remain in employment, is a highly specialised job. The key to the success of JCP in the long-term will be to ensure that they as an organisation are both sufficiently focused on disability matters and resourced sufficiently well enough to do the job. UnumProvident would urge the Committee to ensure that this is the case.

IV.   The role of the Private Sector

  11.  UnumProvident firmly believes that there is a significant role for the private sector to play in helping to return disabled people to work. As the UK’s leading provider of income protection insurance, UnumProvident is particularly well-placed to share with the Committee examples of projects and initiatives that might be of assistance to the Government. Like the Government, UnumProvident:

—  insures people against the risk of not being able to work through acquiring a disability; and

—  assesses all claims made, paying all valid ones.

  12.  However, as part of its product offering, UnumProvident goes one stage further and actively works with the claimant to help return them to work. UnumProvident recognises the value of early intervention, active case management and rehabilitation. We are convinced that our approach works, and currently around 15% of all our claimants are able to return to work, a rate which we believe is far in excess of that achieved with recipients of incapacity benefit.

  13.  UnumProvident is actively engaged with the Government, policy-makers and large employers to share best practice and to see where our systems and approaches might be applied more widely. We are currently working with the Department of Work and Pensions on this, and have had discussions with officials in HM Treasury and the Prime Minister’s office. We have met with officials to help better understand the nature of the IB casebook, and to discuss how our commercial experience and expertise might be more widely applied. In addition, we will shortly be supporting the National Employment Panel in its work on the New Deal for Disabled People through a secondment of one of our senior managers. 

  14.  UnumProvident is confident that its policies and approach to claim management and rehabilitation can be replicated more widely for those on IB. Whilst we are more than happy to share our commercial expertise and proven ideas, we would particularly welcome the opportunity to put them into practice.

  15.  One of our proposals concern a genuine public-private partnership between the State, UnumProvident and Working Links based on the current Working Links[3] model. The partnership would seek to move disabled jobseekers through a series of supported stages until it was possible for them to return to work. Once placed in appropriate work, both the client and the employer would be supported for a defined period. UnumProvident would envisage that whilst there may be small payments throughout the return to work programme, the majority of the payment would come, as it does currently for Working Links, when the desired outcome is achieved, ie when the client has both found a job and been supported in it for 13 weeks.

  16.  Of course the other role for the private sector is as employers of disabled people. UnumProvident is committed to diversity and believes firmly in the business case for including disabled people amongst your workforce. It is the responsibility of those employers who have recognised the value of employees with disabilities to act as champions and persuade other employers of the business case for doing the same. UnumProvident takes this responsibility very seriously indeed and has won awards for its work in promoting the rights of disabled people and encouraging and facilitating their return to work in a very practical and real sense. We do not claim to have all the answers, but we do attach a document[4] which outlines our experience and practice in recruiting disabled people.

  17.  Through its leadership of the New Beginnings initiative, UnumProvident is currently leading a coalition of Government, leading employers (for example HSBC, Barclays Bank, the Institute of Directors) and organisations of and for disabled people (eg RADAR—the Royal Association for Disability and Rehabilitation—and the Shaw Trust) to remove the barriers that prevent disabled people finding and keeping work. As part of this initiative, UnumProvident have been closely and actively involved with the Employers’ Forum on Disability and JobCentre Plus, amongst others, to promote disabled people to employers, and to help employers recruit and retain disabled people in the workplace. Recent work in this area has included the launch of The Knowledge, and work looking at gender and disability which was carried out for us by the Fawcett Society.

  18.  More recently, the Advisory Group and our Large Employers’ Group have concluded that we could make a valuable contribution in the area of welfare reform. We are currently planning work streams in this area and hope to be able to report on progress soon.

V.   Tax Credit and Benefit Systems

  19.  It is our belief that the current tax and benefits system is overly complex, can provide strong disincentives for disabled people to look for work, and is in need of radical reform. UnumProvident put forward a blueprint for welfare reform in its paper “Diversity in Employment”. In brief, and as outlined at paragraph 8, our proposal is that those disabled people capable of some work should be moved from IB to a form of JSA. Here they would be properly supported in their search for and transition into work.

  20.  However, we also recognise the specific and unique costs incurred by individuals in relation to disability, and so would propose that in addition to JSA they would be paid an additional and single benefit (JSA Plus). As they find work, the combined level of benefit income forms an income guarantee, as they earn more, they replace benefit income with earned income, with the “plus” element perhaps converting to a tax credit in a similar way to the current Child Tax Credit.

  21.  We believe that our proposals have the beauty of simplicity, set the correct financial incentives and send the right signals to employers and job seekers with a disability. We now go on to explain some of our thinking around the proposal. 

  22.  It is UnumProvident’s experience that most disabled people are capable of some work. We would contend that this is the case even where those people are already in receipt of incapacity benefit. What is key is that the individual has an expectation of a return to work. In this respect, the terminology and eligibility criteria for claiming incapacity benefit are particularly unhelpful. First, the very term “Incapacity Benefit” suggests that it is a benefit that is paid to those who are incapable of work. This is both derogatory and obstructive. In fact, most disabled people are capable of some work, in some capacity or other, so why label them as being “incapable”?

  23.  Labelling someone as incapable of work not only sends them the wrong signal, it sends employers the wrong signal too. Someone on JSA applying for a job is to all intents and purposes capable of work, whereas someone on IB has already been found “incapable” of work, and consequently less likely to be considered by the employer. We would contend that labelling people as incapable presents a significant barrier to them finding and keeping work.

  24.  Second, those people in receipt of IB are classified as economically inactive. They are not required to search for work in order to continue to receive this benefit, and not all of the Job Centre Plus return to work programmes are available or accessible to those classified as economically inactive, unless they are referred by a DEA of course. This in turn raises issues around the profile and resourcing of DEAs. In any event, we would contend that the terminology and the structure of benefits can make it difficult to look for work, or access work-based opportunities, as well as reinforce the mindset that the claimant is too sick to work.

  25.  UnumProvident would propose that IB should be retained for those disabled people who are genuinely incapable of undertaking any work whatsoever. The remainder should be transferred to a form of Job Seekers Allowance (JSA) which is sufficiently flexible to recognise that they have limited capacity to work. JSA claimants are required to look for work, and indeed are supported in that process by JCP. This simple administrative move sets the expectation of a return to work both for the individual and also for potential employers.

  26.  There is a further issue around flexibility of benefits. In UnumProvident’s view, return to work is a continuum of options, which can range from an hour’s therapeutic work to full-time employment. At any one time, an individual disabled person can be anywhere on that continuum and move both up and down it over time as their disability improves or worsens, for example. The welfare benefit system/welfare safety net needs to be sufficiently flexible to deal with these changing circumstances. At present, it does not, and so treats the decision to work as a binary one—ie one is either fit to work or one is not. 

  27.  In contrast, UnumProvident deploys a system of graduated return to work. Claimants are slowly reintroduced to work; as their capacity to work develops and increases, then so too do their hours of work. Whilst claimants are in this programme of graduated return, UnumProvident pay partial benefit, gradually reducing benefits as the claimant earns more income. It is conceivable that the individual may never return to full-time employment or to their former level of insured income. Where this is the case UnumProvident will continue to pay partial benefit. It is this flexibility in approach that allows us to move clients back into work and help them to fulfil their potential. UnumProvident would recommend that the Select Committee looks closely at a flexible benefit approach and would be delighted to discuss this solution further.

  28.  The concept of return to work as a continuum is an important one, as it makes it clear that some claimants may not ever be able to work sufficient hours to financially support themselves fully. That does not mean that their contribution is any less valid. Many disabled people on incapacity benefit have not worked for a long time, and may even suffer relapses when at work. Consequently, the benefits system needs to be flexible enough to cope with people moving in and out of work, and be able to adjust the benefit level according to the amount of work they do. At present, it does not do so, and some disabled people can be worse off in work than out of it. [5] 

  29.  The system needs to be flexible enough to ensure that work always pays more than benefits and is clearly seen to be doing so. UnumProvident proposes a simple benefit, linked to a guaranteed minimum income, which recognises the cost of disability. UnumProvident’s proposal for a tax credit outlined in our “Diversity in Employment” paper seems to be close to the proposal for a tax credit in the Department of Work and Pensions’s current Green Paper, and UnumProvident welcome this development.

  30.  However, it is not enough to simply ensure that work always pays. Many disabled people are put off looking for work because they are worried about what would happen if they found and then lost work. Their distance from the labour market can make them nervous of work. This is compounded by the operation of the benefits system. Because one has to qualify for higher rate IB, those currently on it can worry that if they take a job and lose it, they will return to IB on the lower rate and have to re-qualify, thus making them worse off than before. Admittedly, there is the 52 week linking rule, but UnumProvident would contend that is far too complex. We would recommend a system similar to the US where benefit levels are effectively protected and it is therefore easier to move in and out of work.

  31.  We hope that you find these comments and observations both useful and informative of our experience, and we would welcome the opportunity to discuss them further with the Select Committee.

Joanne Hindle

Corporate Services Director

13 December 2002

 

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1   Data is drawn from the Labour Force Survey Winter 2001-02. For further information see DRC Disability Briefing, May 2002. Back

2   See Case Studies: the UnumProvident Approach (UnumProvident) 2003. Back

3   Working Links is a public-private partnership owned by Manpower, Cap Gemini and the Department for Work and Pensions. It specialises in finding innovative solutions to help people in hard-to-place labour market groups. Working Links has been a success, having placed over 23,000 long-term unemployed, disadvantaged people into work since their creation in April 2000. placing someone in work every nine minutes of every working day. Back

4   See Disability in the Workplace: Sharing Best Practice.  Back

5   For specific examples of how disabled people can be worse off in work than out of it, UnumProvident recommend that the Committee consults Moving into work: A disabled person’s guide to the social security and other help available when starting a job. Disability Alliance (December 2001). Back 

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