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Zurich study recommends solutions to widening income protection gap

Schaumburg, Ill., October 11, 2017

Governments, employers, insurers and individuals all play a role in helping to close the gaps

Zurich Insurance Group and the University of Oxford published a study today that highlights the growing risk of income protection gaps (IPGs) and recommends solutions to a problem that, if not addressed, could impoverish millions of Americans.

The study, “Embracing the income protection gaps challenge: options and solutions,” is based on extensive research and outlines practical recommendations to address critical issues and gives insights into how governments, employers, insurers, intermediaries and individuals can work together to close IPGs.

Income protection gap is defined as the reduction in household income caused by the death or incapacitation of an adult wage earner on whom the household relies, taking all public and private sources of replacement income into account.

Zurich’s research and the study based on it describe how public/private partnerships between governments, companies and insurers can play a crucial role in helping to ease this burden and close the gaps. Financial education is key to securing personal financial security.

There is an urgent need for solutions, the study concludes. As life expectancy increases, extending one’s working lifetime can provide financial rewards. Yet more years working also puts individuals at increased risk of becoming disabled during their careers. Chronic sickness, injuries or other conditions can prevent or impair a wage earner’s capability. With government resources constrained, and a growing number of people working part-time and temporary jobs, people are increasingly at risk. An IPG could seriously deplete household budgets, savings and retirement accounts. The burden of guaranteeing long-term financial security is simply too great for many individuals to bear.

“The income protection gap is not just a problem for individuals and families, but also for employers, government and society as a whole,” said John Miskel, head of Corporate Life & Pensions, Zurich North America. “It will take a multi-stakeholder approach to close the gap.”

Solutions include finding a balance between responsibilities assumed by governments, employers, insurers – and other financial institutions like intermediaries – and individuals in protecting household income. Key recommendations for insurers and employers include:

For insurers:

  • Target messaging and engagement with appropriate framing (e.g., link consequences of people’s financial decisions to others in their household).
  • Continue supporting scenario-building apps.
  • Develop programs that insure pension income against the long-term risk of contributions lost due to disability, premature death and progressive retirement.
  • Include extended mental health cover in group insurance policies when certain parameters of treatment are met.
  • Develop group insurance packages that create income protection insurance as an ‘add-on’ to private pension schemes.
  • Encourage employers to auto-enroll (with opt-out option) workers into IPG insurance.

For employers:

  • Design effective financial education programs with employees to make available ongoing financial advice that combines instruction with practice and engagement.
  • Design methods to better inform employees about what benefits are available to them and how income protection insurance fits into the package (whether from the state, employer or otherwise).
  • As official pensionable age is postponed, create flexible retirement options for older workers with impaired lives that involve part-time work and an alternative income.
  • Create contributory employee assistance plans for employee support when confronting family, legal or financial crisis outside work (prevent presenteeism) – or as a source of benefit corresponding to predefined health-related need.
  • Consider auto-enrollment of employees into an IPG protection plan.
  • Create and maintain a core set of benefits for all employees, promoting equity and preventing social dumping, based on salary scales in each country.

The research report gives global recommendations for closing the IPGs and provides insights and solutions for 12 countries – Australia, Brazil, Germany, Hong Kong, Italy, Malaysia, Mexico, Spain, Switzerland, UAE, the United States and the United Kingdom.

This is the final of three reports on IPGs by Zurich and the Smith School of Enterprise and the Environment at the University of Oxford.

The first report, published in 2015, revealed that a growing number of Americans have little or no income protection, leaving millions at risk of slipping into poverty. IPGs are caused by several factors, including: An aging population; reduced funding for government social programs; inadequate savings and insurance protection for individuals and families; and rising disability levels.

The second report, published in 2016, highlighted the results of a survey of 1,000 Americans to measure the extent of the problem. Among the survey findings: An estimated two-thirds of Americans do not have enough savings to cover expenses for six months if they become ill or disabled and are unable to work, and more than one in four would deplete their savings in less than a month.


About Zurich

Zurich Insurance Group (Zurich) is a leading multi-line insurer that serves its customers in global and local markets. With about 54,000 employees, it provides a wide range of property and casualty, and life insurance products and services in more than 210 countries and territories. Zurich’s customers include individuals, small businesses, and mid-sized and large companies, as well as multinational corporations. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. The holding company, Zurich Insurance Group Ltd (ZURN), is listed on the SIX Swiss Exchange and has a level I American Depositary Receipt (ZURVY) program, which is traded over-the-counter on OTCQX. Further information about Zurich is available at
In North America, Zurich is a leading commercial property-casualty insurance provider serving the global corporate, large corporate, middle market, specialties and programs sectors through the individual member companies of Zurich in North America, including Zurich American Insurance Company. Life insurance and disability coverage issued in the United States in all states except New York is issued by Zurich American Life Insurance Company, an Illinois domestic life insurance company. In New York, life insurance and disability coverage is issued by Zurich American Life Insurance Company of New York, a New York domestic life insurance company. For more information about the products and services it offers and people Zurich employs around the world go to 2012 marked Zurich's 100-year anniversary of insuring America and the success of its customers, shareholders and employees.