The other day I was reminded of just how careful companies need to be when managing life insurance policies and maternity.
I just happened to be discussing maternity leave benefits with a client over lunch. He told me a very sad tale about a young lady who went on maternity leave at his former company – it’s a cautionary tale.
This employee was earning £35K when she went off on maternity and she had a company life insurance policy worth four times that amount.
Unfortunately, she sadly died in a car crash while still on maternity. The HR manager was deeply distressed by this news as they had been friends, but she was comforted by the fact that the family of the deceased would get the full life insurance pay out of £140K.
However, when the company investigated, it was horrified to discover the wrong salary data had been sent to the insurance company. Instead of submitting her base salary, payroll had sent her actual salary for that year – which was based on her maternity pay.
Unfortunately, the rules are very clear when it comes to life insurance - four times salary will be paid out and insurers will take the most up to date information given. Sadly, in this girl’s case, her family ended up with a payment far less.
This highlights the real challenge for companies sending data to insurers. Human error is all too easy and it’s a big risk that someone in HR or Payroll inputs the wrong information. The risks can be even higher in large organisations where quite a few people could be being paid under their usual salary, including employees on maternity, long-term sick or sabbatical.
Trickier for companies in this situation is the fact the insurer will usually stick to their guns and only pay out on based on the salary data submitted, leaving the benefits consultant in a bit of a pickle trying to explain this to a grieving family.
What is the moral of the story? Companies must be super careful with data they send to insurers, particularly when dealing with life insurance and income protection policies.
To avoid this risk, we and many of our clients use Elyisum – an amazing online benefits platform created by our sister company, Psyon.
Elysium supports HR and benefits professionals who are administering group life assurance and income protection polices and enables them to send employee benefits information monthly directly to insurers. It provides clients with accurate and up to date data on all aspects of their employee benefits. This includes insurance policies, membership information, renewals, claims and spending.
Over 200 of Punter Southall Health & Protection clients are already using the platform which they know as Gladis. If only Gladis had been around earlier it may have saved my client’s previous company from having to deliver the devastating news they had made a mistake, resulting in a young family losing out on the full life insurance they were entitled to.