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Uncovered: a life assurance divide

07 July 2015

Employees working in the manufacturing sector get 50 percent less in life assurance benefits than their counterparts working in the professional services sector.

Paul White

New research carried out by PSHPC, a UK based health and protection adviser, shows that the average value of life assurance benefits for those in manufacturing is half of that received by those in professions such as the law and banking. This is despite the fact that the cost of the benefit is almost the same.

The research found that average life assurance for professionals is £232,000 per annum at a cost of £210 per person, while the average life assurance for individuals in the manufacturing sector is only £113,000 per annum, but costs almost as much at £180.

“There are several reasons, based on actuarial risk calculations, why the cost of group life assurance for manufacturing employees is relatively expensive compared to their professional services contemporaries," says PSHPC consultant Paul White. "One is that manufacturing plants tend to be in areas of the country where life expectancies are somewhat lower, in contrast to areas where professional services employees are more likely to live. Secondly, manufacturing jobs are more likely to involve work which may cause health problems, such as musculo-skeletal issues; and even in some case fatalities through industrial accidents.”

Those in the manufacturing sector can perhaps take some comfort from the fact that while their life assurance benefits are less than those in professional services occupations, they are still better than for those in the retail, leisure and hotel sectors, who only enjoy an average life assurance benefit of £45,000 a year.

When it comes to group income protection (GIP) benefits, those employed in manufacturing are also at a disadvantage to those in professional services. “Not only is GIP less frequently given to those in manufacturing than to those in professional services, it is also rarely provided on a universal or democratic basis, tending to be limited to managers and those in more senior positions,” says White.

“Also, like life assurance, the cost of the benefit is very similar for employees in manufacturing as for those in professional services, despite the fact that those in the latter have far higher average salaries. This is again because there are lifestyle and occupational factors with manufacturing workers - the likelihood of an unskilled labourer suffering a long-term disability at any given age could be three or four times greater than a professional employee.”

Whereas with life assurance the research found that the average benefit and costs for those in retail, leisure and the hotel sectors were the lowest, for GIP the research seems to suggest they are better paid than those in the “other white collar” group.

“This appears counter intuitive,” says White. “However, the explanation for this is that while life assurance is reasonably prevalent as a benefit for all sectors, GIP is reasonably common in white collar jobs, but in the retail, leisure and the hotel sectors, where it exists, it tends to be limited to senior managers and above. So we are comparing the typical salary for senior employees in retail/leisure/and hotel, with the average salary for a more democratic population in the other categories.”

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