Canada Life is increasing premiums for group income protection (GIP) schemes that have a rate review or go on risk from 6 April to cover the rise in National Insurance Contributions (NICs).
The insurer will also not be increasing payouts for those claims which are already in payment when the NIC rise occurs.
However, those schemes which are still in their rate guarantee period will not see an increase in their premium.
The changes are being made to accommodate the higher rate of NICs and the subsequent Health and Social Care Levy – applying to current and future GIP schemes where the employer’s liability for NICs is insured as a supplementary benefit.
NICs will rise by 1.25% from 6 April 2022 with this increase then separated out as an additional Health and Social Care Levy from 6 April 2023.
Premium increases
Unit rates reflecting the increase in NICs benefits will be used for schemes that go through a rate review or go on risk on or after 6 April 2022.
Most of Canada Life’s schemes use a unit rate based on salary roll and there will be no change to annual premiums for these schemes within their rate guarantee period, the insurer said.
The small number of schemes priced on total benefit rather than total salary will see premiums increase by a small amount as the additional NICs benefit will increase the total benefit roll.
Single premium schemes will not see rates increase due to the change in NICs unless they go through a rate review or go on risk on or after 6 April 2022.
Active claim payments will not increase
Canada Life added that any NICs benefit in payment will reflect the liability applicable at the end of the deferred period, meaning if the claim is already in payment, the NICs benefit will not increase from 6 April 2022, or thereafter, while the claim is being paid.
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.
And 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.
Dan Crook, protection sales director at Canada Life, (pictured) said: “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.”