Permanent health insurance

If an insurance company refuses to pay up to an employer for an employee who is on long-term sick, the employee has no right of redress, according to the Court of Appeal.

Employers are increasingly introducing insurance-based schemes (usually called permanent health insurance [PHI]) to cover for long-term sickness absence. But there is no contractual relationship between the insurer and the individual employee who is insured. This means that if an insurance company refuses to pay up there is no claim that can be taken by the employee against it. The insurer does not owe the sick employee any duty of care, as the contract is between the employer and the insurance provider.

PHI schemes are likely to become more important because the right to statutory sickness benefit may be under attack. The government is looking to tighten up the rules for getting Statutory Sick Pay and is considering introducing a change, which would require anyone off sick for more than six weeks to see a personal advisor from the Benefits Agency to assess how they could return to work. The aim is to reduce public spending after research suggested that one in six people off for more than six weeks never returns to work.