Canada Life has confirmed that its group income protection cover will include higher national insurance payments, provided NI cover is already insured, however in many cases this will not result in a premium increase.
The group risk insurer has made this announcement ahead of planned changes to NI, which will see standard NI rates rise by 1.25 percentage points from April 2022. This increase will be separate out as an additional ‘health and social care levy’ from April 2023.
Canada Life says these changes will impact both current and future group income protection schemes where the employer’s liability for NICs is insured as a supplementary benefit.
The company has issues further clarification on what this will mean for clients in different scheme types:
- Unit-rate schemes
Canada Life confirmed there will be no change to the unit rate for schemes within their rate guarantee period. It says most of the schemes it insures use a unit rate based on salary roll so there will be no change to annual premiums for these schemes.
However it adds that a small number of schemes are priced on total benefit rather than total salary. The premiums for these schemes will increase by a small amount as the additional NICs benefit will increase the total benefit roll on which the price is based.
Canada Life says it will apply unit rates that reflect the increase in NICs benefits for schemes that go through a rate review or go on risk on or after 6 April 2022.
- Single premium schemes
Canada Life’s single premium schemes are priced by applying a rate to each member’s salary. As a result, premiums will not increase due to the change in NICs. Single premium schemes that go through a rate review or go on risk on or after 6 April 2022 will have slightly increased rates that reflect the increase in NICs benefits.
- Claims in payment
Any NICs benefit in payment will reflect the liability applicable at the end of the deferred period. If the claim is already in payment, Canada Life confirmed it will not change the NICs benefit on 6 April 2022, or thereafter, whilst the claim is being paid.
It adds that if the end of the deferred period is on or after 6 April 2022, the increased NICs amount will be used to calculate the benefit. If the end of the deferred period is on or after 6 April 2023, then the new NICs and Health and Social Care Levy will be used to calculate the benefit.
Canada Life protection sales director Dan Crook says: “This change to NICs and the additional levy being introduced in 2023 will not only impact employees but equally will result in the employer paying more too. We wanted to clarify how this will impact both current and future Group Income Protection schemes, and to that end, we can confirm we will insure the liabilities moving forward where NICs are already insured as a supplementary benefit.”
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