New improved insurance coverage for loss of earning capacity

In previous newsletters, we have written about the need to update pension providers’ insurance policies regarding loss of earning capacity products. The required development is a result of the 2013 disability pension and flexi-job scheme reforms and the 2014 sickness benefit scheme reform.

The new product

Virtually all commercial pension providers now offer an improved loss of earning capacity product. In short, the improvement means that the insurance now provides an additional disbursement for employees participating in a job clarification or resource programme.

The need for an additional disbursement has arisen because the local authorities set off their disbursement against the insurance disbursement. In many situations, this means that the local authorities make no disbursements. Therefore, the employee is dependent on the insurance replacing the local authorities’ non-disbursement.

Status in the market

The additional disbursement levels vary across the companies’ products, but the impact is basically the same. Aon has spent considerable resources analysing the insurance policies and in this context engaged in dialogue with many companies and employees.Currently, most of them have implemented the new product in their pension scheme. We expect the rest of the companies to follow suit during the first six months of 2017.

Aon’s assessment

The pension providers have addressed an important challenge and innovatively developed an improved loss of earning capacity product. Aon has assessed three examples of selected companies’ design of the new product.

• SEB Pension has developed the best additional disbursement for employees in job clarification and resource programmes. The additional amount disbursed is the highest in the market. The employee only pays for the necessary additional amount offered at a competitive price.

• Nordea Liv & Pension has proven innovative, now offering a product that automatically adapts to the employee’s salary development.The higher the salary, the fewer public benefits are paid out. Consequently, the insurance coverage increases in line with the salary. The new product ensures that the employee obtains the same coverage regardless of the salary level.
• First version of the new product offered by PFA Pension has reduced some parameters – e.g. lower compensation to employer and degradation of demands of health information. The latter is already off the table. They now introduce an improved version of the product. The improvements will ensure a product that is competitive within the market. The improved product is expected to be enforced by August 2017.
  

Aon has assessed the pension providers’ loss of earning capacity products based on the following three main elements: transparency, security and purchasing power. In addition, the individual companies’ priorities are part of the assessment of the pension providers.