Universal Credit - benefits reforms are good news for insurers

Despite political pressure to back track and/or to suspend it, the government has reaffirmed its commitment to the principles behind its newest state benefit, Universal Credit, in the Autumn Budget. The gradual roll out of this controversial benefit is set to continue.

Background to Universal Credit

Universal Credit is a cumulative benefit encompassing the former separate benefits of Child Tax Credit, Housing Benefit, Income Support, Income-based Job Seeker’s Allowance (JSAI), income-related Employment & Support Allowance (ESAI) and Working Tax Credit.

It is recognised as a recoverable benefit from compensators by the Compensation Recovery Unit and is offsettable against claims for loss of earnings. Some of the individual benefits it replaces were previously offsettable, but some such as Housing Benefit were not. This will serve to increase the amount of recoverable benefits in some cases.

Press and Budget attention

Universal Credit has been much maligned and criticised (despite having popular support across the political parties when the concept was introduced). The Budget has sought to alleviate some of the concerns by reducing the waiting period for new claimants and to enable a Universal Credit loan for new claimants to cover the transition period. However, the government has refused to bow to pressure to suspend or delay its continued roll-out which is due to be completed by December 2018.

Principles governing Universal Credit and overlap with rehabilitation

The principles behind this new benefit and the changes in general to the benefits system in recent years has signalled the government’s commitment to ensuring that ‘work always pays’. In other words that people are always better off working than being dependent upon benefits.

These principles are good news for insurers in a claims context, who will benefit financially from a system designed to encourage persons on benefits back into work at the earliest opportunity. If there is a financial incentive for persons receiving benefits, including injured claimants, to get back to work quickly, it is logical that they are more likely to seek an early return to work. This in turn will serve to limit claims’ value and minimise future losses, which are so adversely affected by the massive shift down to -0.75% of the discount rate applied to claims for future losses.

The DWP has also emphasised the importance of rehabilitation, which it provides to support claimants in the process of getting back to work and is (in appropriate cases) a pre-requisite to a claimant’s continued entitlement to benefits. This dovetails well with insurers’ existing commitment to early rehabilitation of injured claimants.

Comment

In an age where the number and cost of claims continues to rise, not least with regard to the impact of the current discount rate, it has never been so important for insurers to control claims spend. This can be achieved by effective use of rehabilitation whilst at the same time ensuring that they identify opportunities to seek recovery of recoverable benefits and NHS Charges where circumstances and evidence permits.

It is not unheard of for recoverable benefits to exceed £60,000 and NHS Charges to reach almost £50,000. These amounts are significant, especially where the benefits cannot be offset. Set against that however, the costs of recovery are modest and, with the appropriate expertise and experience, success rates can be surprisingly high.

Insurers can maximise recoveries from and minimise payments to the CRU by carrying out regular reviews, maintain and revisit systems to identify cases where recoverable benefits and NHS Charges can be challenged and benefits reviewed or appealed.