Other posters have said most of the helpful things about company income protection insurance and how it works. I agree the issue is management not covering the role but even this might be complex in ways you aren't aware.
If she has an illness or injury that she will hopefully recover from but is hard to predict so return seems to be imminent and then she relapses, then that makes it hard for managers to plan for cover. Someone at my work has had cancer, treatment was successful but the treatment itself has been extremely draining on her physical health and she's also suffering the mental impact of what happened - she has three quite young children so she must have been terrified at the thought of them without a mother. So there seem to have been various discussions about a phased return but then she just isn't up to it. I will add that she is the wife of someone else very senior in the firm so that probably had some bearing, rightly or wrongly, on keeping her role open.
In my previous firm someone else was off long term with a spinal injury. This went on for over 3 years too. What wasn't commonly known was that she had alleged the injury was as a result of workplace conditions so management had to tread very carefully. They did eventually terminate her employment on capability grounds and sure enough she then made an injury/EL claim.
(I've changed some details of the above people to keep things anonymous.)
Another factor might be how specialised the role is. If it requires particular knowledge, skills and experience then it can be extremely difficult to find the right person who is willing to take on a temporary role. But recruiting a new permanent member of staff then risks over manning/redundancy if the original person comes back. I've seen that happen twice and it wasn't pretty.
I also wanted to add that if sick pay has run out and/or even if the person is being paid from income cover insurance, that doesn't mean there is nil cost to the employer. There are still costs attached - the person will still accrue holiday and additional redundancy years. (Not sure if employer still has to pay NI and pension - perhaps other posters will know. ) Those costs will need to be added to the cost of recruiting cover or a new permanent member of staff and sometimes a budget won't stretch far enough.
All you can do is push back on management regarding the workload. Work to rule? Is that a possibility?