The impact of COVID-19 will require the creation of mandatory income protection schemes for employees to provide protection for the financial cost of a similar event.

Research from Zurich Insurance Group and the Smith School of Enterprise and the Environment at the University of Oxford has called for the creation new systems to protect workers from the financial costs of disability or redundancy from a pandemic or other global event.

Among the recommendations in the report, “Shaping A Brighter Future of Work”, are calls to consider mandatory provision of some types of income protection insurance, such as coverage for disabilities and unemployment. Auto-enrolment of employees in plans such as those that offer basic income protection and participation in pension schemes has also been recommended.

“While some countries were hit harder by COVID-19 than others, people in every corner of the globe found themselves facing financial hardship and drained their savings, and, in some cases, retirement funds, as a way to stay afloat,” said Alison Martin, (pic) Zurich’s CEO EMEA and Bank Distribution. “Our findings highlight the demand for solutions that will make it easier for people to prepare for and make it through these kinds of crises.”

The report is the latest in research that began in 2015 when Zurich and the Smith School partnered in an initiative that focused on income protection gaps and agile workforce protection, i.e. flexible insurance and associated worker protection which is provided by multiple stakeholders and tailored to individual career trajectories, addressing various transition points in working lives. The earlier work, which included a report published in October 2020, established the need for decisionmakers to update social protection frameworks. The impact of COVID-19 reinforced those findings.

“Employers are grappling with concerns around training, reskilling and caring for their people and this research looks at how leaders are prioritising and managing these issues, many of which were exacerbated by the pandemic,” said David Henderson, Zurich’s Group Chief Human Resources Officer. “To address these concerns, governments, employers and insurers can look to the report’s recommendations, which call for such strategies as offering incentives for participation in skilling programs, helping employees prepare for retirement through financial education programs and auto-enrolment in pension plans, and conducting assessments of wellbeing activities to ensure they adequately consider employees’ physical and mental health.”

Calls for mandatory and compulsory protections are being raised in some countries, said the report. In Spain, discussions are being held regarding a UK-style model of auto-enrolment into pension plans and the introduction of compulsory savings programs. In the UK, there is discussion around making employer-funded sick pay compulsory.

The report added auto-enrolment could make a difference in helping people prepare for retirement, if the UK model is successful in other parts of the world. In 2019, 77% of UK employees participated in a workplace pension scheme, up from 47% in 2012 when auto-enrolment began, according to the UK’s Office for National Statistics. Young employees – aged 22 to 29 – saw the largest growth in workplace pension membership over the period, rising to 80% from 31%.

“Income protection insurance and term life coverage are expected to see heightened interest from people who were hurt by the financial impact of the pandemic or know someone who was, according to the research,” added the report. “Such interest, however, has been slow to develop and may not translate into heavy demand. This follows Zurich-Oxford research in 2019 that revealed low levels of income protection among survey respondents.”

“The pandemic has made our earlier research all the more relevant and our recommendations in the current report are particularly important in light of the pandemic,” concluded Martin. “The world has been shaken by COVID-19, but insurers, governments and employers are more aware of what it will take to be better prepared for the next crisis.”

The report added auto-enrolment could make a difference in helping people prepare for retirement, if the UK model is successful in other parts of the world. In 2019, 77% of UK employees participated in a workplace pension scheme, up from 47% in 2012 when auto-enrolment began, according to the UK’s Office for National Statistics. Young employees – aged 22 to 29 – saw the largest growth in workplace pension membership over the period, rising to 80% from 31%.