What is group income protection?
Group income protection (GIP) is a type of group risk cover that provides long-term pay to employees who become ill or injured. GIP is taken out by an employer, which is typically the policy holder rather than the employee. The cover pays staff a reduced salary, typically 75%, after a certain period of time. This is often three to six months, picking up where organisations’ short-term sick pay ends. This continues throughout the illness or injury on a long-term basis, but limited-term policies are also available that provide benefits for between two and five years.
If an employee returns to work part-time, they can receive a reduced salary through the insurance. It can additionally be seen as a return to work service, which can include insurers paying for treatment, modifying workstations or suggesting a phased return to work. Insurers can also mediate if a relationship between employees and employers breaks down.
GIP schemes can also offer additional support, such as employee assistance programmes, second medical opinion and online GP services, and support services for cancer, rehabilitation and counselling.
Swiss Re’s Group watch April 2023 research highlights that 90% of GIP schemes cover employers with 250 or fewer staff, which the provider states has remained high since.
What are the cost implications?
For employers, the average cost is £328 per employee, per year, according to Swiss Re’s April 2025 research. Costs can be lower, as employers can choose the level of cover and whether it increases each year. It also depends on how long an employee requires the benefit, what type of business and work the organisation does, and the number of employees it has.
In employee-funded GIP schemes, the cover options are set by the employer and insurer, and the employee decides the level of cover they require. This is used if employers are unable to afford group insurance premium rates themselves.
There are further cost implications to employers if employees are still sick at the end of a fixed-term claim basis, if they decide to provide further support or benefits.
Are there any tax or legal issues?
Employers can put the benefit through their payroll, because it is a continued salary. Employees will still pay tax, national insurance and pension contributions on it. If the employer as the policy holder pays the premium, it is allowed as an expense for tax purposes and they should receive tax relief. Under Optional Remuneration Guidance (Opra), introduced in 2017, GIP is treated as a benefit-in-kind for tax purposes.
What are the current market trends or developments?
In Swiss Re’s Group watch April 2025 report, at the end of 2024, 39% of members received cover which could pay out to retirement age, down from 42% in 2023, while 61% of schemes provided cover up to retirement age, down slightly from 61% in 2023.
Furthermore, 12% received cover which could pay out for two years, up from 11% in 2023, 11% of members received cover which could pay out for three years, and 38% received cover which could pay out for five years, up from 34% in 2023. The report also highlighted that the group risk market insured 3,382,366 people in 2024 for annual income protection benefits, totalling £135 billion.
Meanwhile, industry body Group Risk Development’s (Grid) May 2025 Claims survey found that the group risk industry paid out £674 million in income protection benefits to 18,038 people during 2024, and £27,630 was the average annual new claim paid in 2024, with the main causes for claim being cancer (27%) and mental illness (20%). A total of 1,739 employees who newly claimed under a GIP policy during 2024 had returned to work by the end of the year, and 5,574 group risk insurer interventions were initiated within six months of a first absence.
According to Grid, more employers are moving to a shorter, fixed term of three-to-five years cover, often due to employees frequently moving jobs. Providers are also competing for business through the embedded and add-on services offered alongside the insurance product.
Meanwhile, Swiss Re has seen a trend towards continuing shorter maximum benefit payment periods rather than to retirement age, mostly from larger employers. There is also a greater emphasis on rehabilitation for returning to work, prevention and incorporating support benefits alongside schemes.
Sir Charlie Mayfield has been leading the Keep Britain Working Review, looking at workplace wellness and the number of people who are sick who could be helped back to work. As GIP schemes can play a role in helping ill or injured people return to work, insurers may be interested in the final report due to be presented to the government.
Who are the main providers?
The main providers include: Aviva, Canada Life, Legal and General, LV=, MetLife, Royal London, Unum, Vitality, Wiltshire Friendly and Zurich. The number of individual providers has dropped as many have joined forces, such as AIG Life becoming part of Aviva Protection UK in February 2025.
As examples of available cover, Aviva offers both employer and employee-funded GIP schemes and offer a range of options based on cost preferences, cover types and additional services. It also offers vocational rehabilitation through its GIP scheme, with its May 2025 figures stating that more than 2,600 employees from 292 employers were supported through it. Meanwhile, Canada Life offers day-one absence management support if an employee is off sick, while Unum has dedicated mental health and cancer pathways to provide quick and easily accessible support.
