The Court of Appeal has dismissed a challenge brought by five TUI Airways pilots over changes to their permanent health insurance (PHI) benefits, ruling that a collectively bargained deal between the airline and their union was enough to vary their entitlements, even for pilots already receiving payouts. The judgment in Crabb & Ors v TUI Airways Ltd, handed down on 29 July, upholds a 2024 High Court decision and closes off a dispute that had been running since 2022.
The pilots had been receiving benefits under a PHI scheme after losing their medical certification to fly, some for conditions dating back to 2017. Under the original terms, pilots ruled permanently or partially unfit could receive up to 75% of pre-incapacity salary, a "proportionate benefit" top-up if they moved into other suitable work, and a guaranteed 5% annual increase. TUI replaced that arrangement with a less generous scheme called Pilots' Income Protection (PIP) in 2021, agreed with pilots' union BALPA, which dropped the proportionate benefit top-up and the automatic escalation. The claimants argued a clause in the PHI handbook protecting benefits "already being paid" should have shielded them from the change. The Court of Appeal disagreed, holding that the protection only applied if TUI tried to alter the scheme unilaterally, not where a change was reached through collective bargaining with the recognised union.
The legal reasoning turns on contract law, but the underlying trigger was an insurance problem. The judgment records that PHI benefits for pilots had originally been fully insured, but that cover for pilots over 60 was pulled from the policy as early as 2009, leaving TUI to self-fund that part of the liability. In the years before 2019, premiums from insurer Legal & General rose sharply, a trend the judgment links to tighter fitness-to-fly regulation following the 2015 Germanwings crash and a corresponding rise in claims. By the judge's own finding at first instance, the premiums had become "unaffordable" and change was unavoidable.
That's a pattern familiar to anyone underwriting group risk business: a scheme with generous, decades-old terms becomes commercially unviable for the insurer covering it, the employer is left holding the liability the market won't price affordably, and the only way out is negotiating a less generous replacement with whoever represents the affected employees. Group risk products, including income protection, paid out £2.69 billion in claims across life, income protection and critical illness cover in 2025, according to Group Risk Development (GRiD), and the market has grown steadily as employers lean on group income protection to manage long-term absence. Pilots are a small and unusually high-cost slice of that market, but the underlying dynamic, insurers repricing or withdrawing from a risk once claims experience deteriorates, plays out across group risk books more broadly.
For employers and insurers, the case offers useful clarity rather than a new principle: where an insurance-linked benefit is incorporated into employment contracts via a collective bargaining clause, as is standard practice across unionised sectors, changes agreed with the recognised union can vary even long-standing benefits for existing claimants, provided the variation comes through negotiation rather than unilateral employer action. That distinction, between changes imposed and changes bargained for, is likely to resurface wherever employers try to move legacy, fully-insured benefit schemes onto more sustainable footing.
UK group risk claims payouts have been climbing for years, and as underwriters get more selective about which occupational risks they're willing to hold, more employers may find themselves in TUI's position: negotiating down benefits that were only ever affordable because an insurer was willing to carry them.
The pilots' barrister, Alice Mayhew KC, had argued the changes were invalid partly because the union does not act as employees' legal agent in collective bargaining, a technical point the court accepted but found made no difference to the outcome. TUI's win leaves the PIP scheme, and its self-funded structure, in place.
