Richard Walsh: Changing employment patterns mean new challenges for IP advisers

Before Covid the UK workforce had already changed considerably. Earlier this year the BRHG hosted a very interesting discussion from Ben Glover an author of the DEMOS (www.demos.co.uk) report on “The Liquid Workforce”. This group of workers includes the self-employed (4.93 million in March 2019, according to ONS statistics.) temporary workers, zero-hours workers, freelancers and those with multiple flexible forms of employment. Although 22% are on low incomes there are many who are on well above average incomes.

But that was then. According to a Resolution Foundation report published in May the Covid crisis is expected to hit workers hard, with evidence from previous crises indicating that the young are likely to be affected to a greater degree than most. Many such workers fit into the Liquid Workforce category. If we look at millennials aged 20-39 (prime buyers of IP) and working in atypical jobs prior to the outbreak, they are more likely to have been furloughed or lost their jobs, both compared to older generations and to their counterparts in typical jobs. Almost two-in-five millennials in atypical jobs have been furloughed, lost their job or had their hours reduced, compared to just over one-in-five millennials in typical jobs.

So what about the future? The EY ITEM Club Summer Forecast 2020 sees a UK GDP contraction of 11.5% in 2020 reflecting the fact that the Covid pandemic is having an unprecedented and fast-moving impact on the UK economy. Global economic activity should also be markedly stronger from the latter months of 2020 onwards as other economies recover from their Covid-related challenges. But I wonder whether this will actually happen given the rise of new infection spikes and local lockdowns. As the year progresses a lot of people will have lost their jobs despite the Government’s supportive measures and they forecast the unemployment rate to get up to around 9.0% in late 2020/early 2021 from 3.9% in the months to May.

Moving further ahead, on the assumption that the UK and EU avoid a ‘no-deal’ outcome at the end of 2020, they expect the economy to grow by 6.5% in 2021. Even so, it is not expected to return to its Q4 2019 size until 2024. But that depends on what happens with Covid. Should the UK and the EU fail to reach a free trade agreement by the end of 2020, trade between the UK and the EU will take place under World Trade Organization (WTO) rules from 1 January 2021. If this happens, they suspect growth in 2021, at least, will take a major hit.

So what does all this mean for IP advisers selling to the liquid workforce sector. It seems like such people will be particularly hard hit by the crisis although with redundancies from traditional sectors on the up many such people may move into self-employment etc. So opportunities will remain albeit in a challenging area in flux.

This brings me to my final point – on the “flux” and four challenges for you:

• Policyholders’ circumstances can change frequently and cover may need to be amended or renewed, but is it always feasible to review/amend policies yearly or more often?
• It will be important to look longer than just last 12 months and use income level from before illness started, with cover supporting any ‘return to work’ plan from the employer. To what extent can this be achieved in practice?
• How should the people who have just started out as self-employed be treated – what earnings should be insured?
• What happens to in-force business – how can policies be adapted to changing circumstances? How can over-insurance be avoided?

Some might argue that some sort of common industry standard should be set up and I know the IPTF and PDG have been looking into this. My own view is that, given the nature of current flux there might be some general principles but it is far too early to start down the road of detailed guidance. Maybe when things settle down a bit – but the jury is out.