Inadequate employee benefit schemes expose employees to risk

10 February 2009 Alexander Forbes Risk Services

Employers generally believe that the Statutory Compensation for Occupational Injuries and Diseases (COID)Act and the Road Accident Fund, combined withretirementfundriskbenefits and optional medical aid packages, provide their employees with adequate cover in the event of serious injury or death.

“Most companies and trustees are, however, unaware of the gaps and overlaps between the host of statutory and voluntary covers available – only discovering the risks that they are exposing their employees to when it’s too late”warns David Honeyman, Product Manager at Alexander Forbes Cre8 (Pty) Ltd.

For example, Mr. Gumede (an average South African employee) is disabled from the waist down in an accident and is put off work for four months.

Since most South Africans with medical cover usually take a basic hospital plan (with a savings allocation), once Mr. Gumede leaves hospital, he will be responsible for a host of out of hospital expenses – like specialists’ accounts, therapy etc.

“He will also need to have his home and car made wheelchair friendly at considerable expense” adds Honeyman.

But, says Honeyman, “Since Mr. Gumede will still be able to perform his desk job he will more than likely not qualify for a disability benefit under his retirement fund – despite the substantial costs that he has had to bear.”

An incident like this could bankrupt Mr. Gumede and seriously compromise the lifestyle and prospects of his family.

And, even if Mr. Gumede became a full quadriplegic, entirely incapable of working, he would probably only qualify for a disability benefit of 75% of his salary, despite having many other additional expenses to cover.

These examples along with the Road Accident Amendment Act of 2005 highlight the need for Personal Accident Insurance as part of the employee benefit structure offered by companies to their employees.

Another scenario that few companies consider is injury or disability of employees' dependants.

Should, for example, “an employees six year old daughter becomes a quadriplegic your employee or their spouse may have to give up their job to care for her” says Honeyman.

In a situation like this “not only would the income of your employees household be severely reduced but all out of hospital medical costs not covered by medical aid schemes would be for your employees account” adds Honeyman.

As such, Honeyman urges employers to offer their employees a voluntary scheme where they purchase cover for their families at their own expense - with premiums being paid directly from the employee’s bank account.

To meet this need Alexander Forbes Cre8 (Pty) has designed Voluntary and Compulsory Schemes able to incorporate an integrated claims management system with the COID claims.

Honeyman concludes that this system “enables us to provide employers with expert advice and assistance in insuring that regardless of the nature, severity or target of disability their employees will not suffer from the financial impact of disability.”

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