Players often ask us about the various career–ending insurance solutions on the market. The article below (written last year for Running Rugby magazine) attempts to explain what is available in an objective way. Since the article was written, other income replacement schemes have been introduced, giving players greater options but a bigger headache in selecting the right cover.
New Policy for Serious Injury Dave Williams looks at insurance products designed to protect players against a career-ending injury.
To many pro players in their twenties the prospect of retirement from playing looms on the horizon like a gathering storm. The unsettling truth: that the storm threatens to rush up at lightning speed in the form of a career ending injury, lures many towards the shelter of insurance against being sidelined, either temporarily or permanently.
Unlike most segments of the rugby industry, the options for personal accident insurance for players have remained pretty static until recently. Policies have been inconsistent and often change on a yearly basis, premium costs go up as players get older in spite of a clear injury history, "no–claims" incentives have not materialised and Lloyds have tended to dominate the underwriting scene, possibly contributing to a state of inertia.
The UK standard in both codes is for an employer to have the option to release a player from contract after 26 weeks of continuous or an aggregate period of injury. Some UK clubs used to offer a career ending element to contracts, but this has ceased to be the case. From a player's point of view, it's a confusing way to buy peace of mind.
From an underwriter's point of view, backing a policy in a niche category like pro rugby is risky business. After more than a decade of claims history, pro rugby is becoming more of a known risk, but the pool is so small that one–off big pay–outs can discourage a group from coming back to the table the next year, leading to inconsistency in policies and higher premiums.
A new income protection product – successfully drawn up and applied to Irish professional rugby – is likely to change the scene in the UK. Arachas Pro Protect cover offers income security without the restrictions of exclusion due to previous injury or the usual requirement of a "write-off" decision within 12 months of an injury which may force the issue in many PTD cases.
Renewed every year at a current premium of 3% of salary for any player of 34yrs and below, it ensures he receives up to 50% of his gross income – roughly the equivalent of the full net amount depending upon tax bracket – up to the age of 35 (or for a maximum of 10 years if younger than 25 or a minimum of 3 years if older than 32) in case of injury or illness preventing you from playing rugby for a living.
What's the catch? The money is only available to make up the difference to the same level as your previous rugby earnings. Get a well–paid job from day one and the policy will not pay out. However, anecdotal evidence suggests that a pro player should prepare for an annual income drop of at least 60% in the three years following a planned retirement.
The Arachas scheme is backed by Unum insurance who have 1.7 million people covered in the UK on general "lifestyle protection" policies. The current premium to pay–out ratio is set on only three years experience in rugby in Ireland. The costs could well increase as a true claims history picture forms and the underwriters have a better grasp on the actuarial risks. The current premium rate is promised to stay fixed for two years. There is nothing stopping a player from opting in and out of the policy on a season–by–season basis nor on insuring himself for less than his full salary.
The Arachas scheme has been the only official policy offered to members of the Irish Players Association (IRUPA) for the last two years. All Irish–based elite players have a PTD element to their employment contract, but the benefits lessen as the player ages. Ireland also differs from the UK in that the injury clause in standard contracts provides for a second six month period at half pay after an aggregate six months out through injury. Players buying into the Arachas scheme will get 75% of their salary paid from a premium of 3% per year (recently increased from 2.5% of gross salary). Once they enter the second six months of aggregate injury and their salary is reduced their policy will make up the difference.
"It's the best solution currently available to our members," explained Niall Woods, Chief Executive of IRUPA. "It's an income protection scheme that doubles up as both temporary and, in the worst case scenario, permanent cover. There's also an option to buy specific injury, hospitalisation and critical illness cover."
IRUPA have a fixed group rate agreement with Arachas for another two years in which the premium is fixed.
Current PTD policies on offer usually pay a lump sum claim 12 months after the injury subject to injury exclusions. Standard premiums for PTD insurance though, are half the price of the new scheme at between 1% and 2% of the amount covered dependent on age. PTD cover does get more expensive for rugby players of 29yrs and older. A player can only insure himself for a maximum lump sum of three times his gross salary.
Current TTD policies will pay a monthly net sum (after the first 26 weeks of injury) and are usually only available combined with an element of PTD. A sensible approach would suggest that for an established player in his mid-twenties, some temporary cover would ensure that – should he suffer a long term injury – he could dedicate himself to recovery and rehab even if his club decides to terminate the contract.
The insurer is obliged to advise on which injuries and conditions are excluded from the policy once the proposal forms have been processed. Most pre–existing exclusions on PTD/TTD policies are removed on a rolling basis three years after they occurred. Most PTD policies also give you a number of games in which you can attempt to make a comeback without affecting a PTD claim.
Consider the case of two players who have suffered debilitating setbacks in the last year:
Simon Best played prop for and captained both Ireland and Ulster and was covered by the Arachas scheme. Heartbeat irregularities detected at last year's World Cup prevented him from continuing his career at the age of 29. The income protection scheme has allowed him to take stock of his position in good time, where he may well have had to take the first job that came his way.
"The insurance cover has given me time to re-evaluate," said Best. "Even six months after finishing my rugby career I'm still working out exactly what I'd like to do: go into re-education or take a lower-paying job that will give me the right kind of experience."
Best should also able to claim on his PTD cover that is built into his IRFU contract.
27 year–old hooker, Ben Gotting moved from Wasps to Worcester in 2006. He suffered extensive knee damage that required surgery, the recovery from which would take him up to six months beyond the end of his contract. There was no obligation for the club to keep him on. He is now working in recruitment in London as well as rehabbing his injury and trying to get his career back on track.
"I topped-up the standard PRA permanent disability cover before my injury and continue to pay the monthly premium in case it is the end of the line for my rugby," Ben explained. "But, my goal is to get back into the top flight as a full–time player. Had I been able to see into the future, I would have also taken out temporary disablement cover or some kind of income protection, but that's easy to say now."
"I'm trairk and see their physios twice a week. If all goes to plan, I'll be playing again by October. To put a positive spin on my situation, I'm learning about recruitment with banking and finance firm Morgan McKinley and hope to become a consultant in the near future."
The PRA scheme offers Premiership players up to £60k of PTD cover through membership of the Association. Similar schemes are offered to pros in Scotland and Wales through their own player unions.
Combined Insurance of America (a subsidiary of insurance giant AON) offer compensation schemes that pay policy holders for each day they spend off work sick, injured or in hospital. The schemes have been popular with players who often claim despite the fact that they are still being paid a salary for at least 26 weeks. The typical costs for such cover are between £40 and £60 per week with a maximum claim for pro rugby players at £200 per week for up to seven months out. These types of scheme seem to offer some form of consolation for lost training and playing time, but do not cater specifically for career-ending injury or longer-term temporary cover.
There are other plans that combine PTD with pension contributions, but most IFAs will advise a player to keep such long–term solutions as a pension separate from insurance products that are subject to change on a yearly basis.
If they want the best protection against the unthinkable, players and advisers will have to keep in tune with policies, costs and track records to be sure they're not exposed to too great a risk of that approaching storm.
It's always a good idea to consult an independent financial adviser who understands professional sport. Most policies are sold by brokers or agents who earn a commission on a policy sale. It's a good idea to check the broker's credentials although no formal qualification is required to sell general insurance products in the UK. The FSA require brokers to demonstrate competence and reasonable care. There is a fallback option of the 14 day cancellation window for those who have second thoughts.
Once insured it's advisable to read all the paperwork, keep a file of documents and ask for copies of medical info from your club if you think a claim is likely. Fill in all forms honestly and in detail. Not keeping up with payments may lead to loss of cover.
Income protection schemes and policies insuring against loss of own profession should not be confused with policies protecting against injuries that prevent a rugby player from conducting any work at all. Such schemes are run for pro and amateur players by the governing bodies of their sport.
Dave Williams of Big Bug Sports Ltd has been managing the careers of rugby union players since 2000. He is not an IFA, but needs to keep abreast of the insurance market on behalf of the players his company represents. He is also a publisher of RR magazine.
