Swiss Re’s Ron Wheatcroft, Vitality’s Karl Hewstone and corporate protection advice specialist Dave Richards share their views on the clear and present opportunity to discuss business protection with clients.
As many as a third (34%) of business owners are not insuring against the impact of the loss or ill health of key employees, despite acknowledging that their firms would fail if they or a key member of staff passed away or suffered a terminal illness, a recent survey1 by us revealed.
Just over a year on since COVID-19 first emerged, businesses are still coping with a raft of challenges, and this has meant that longer-term planning considerations such as business protection insurance may have not been a priority. “However, our research shows how many organisations recognise they have a single point of failure that would cause their business to close,” explains VitalityLife director Karl Hewstone.
"As we emerge from lockdown and businesses look to return to some sort of normality, the coming months are an optimal time to be reflecting on the past year and to start having conversations about putting plans in place for the future."
With mental health and wellbeing on the agenda more so than ever, business protection is appearing as another piece of the financial puzzle which organisations cannot afford to ignore. Our survey revealed that 73% of business owners said they were now more aware of their own health and 84% were more concerned for the health and wellbeing of their staff.
“Awareness is greater than ever before. As people have become far more aware of their own mortality and health and the financial consequences for their loved ones, it is absolutely the right time to ask the same questions of businesses and the impact should they lose an individual key to their business.”
Size mattersOf the six million businesses in the UK, just over 1.4m employ one or more people2 and nearly all are small with 36,000 having between 50 and 249 employees. Only 8000 have 250 employees or more.
According to Wheatcroft, many of these 1.4m business will be dependent on just a few people who cannot be easily replaced for the business to succeed. “If these people die or become long-term disabled, there is a financial loss to the business in just the same way as if there is a fire or other damage at the premises. Without a cash injection, the business may have to stop trading. Business protection policies can provide this cash injection and also be used to repay overdrafts, business loans, creditors or accounts with suppliers.”
Only 21,060 new policies insuring key people were written across the whole market in 2019, according to Swiss Re’s Term & Health Watch 20203. Considering average new sums assured in 2019 were £432,129 for level term key person policies and £232,828 for level term with critical illness cover – far higher premiums (and therefore commissions) than for personal life policies – “the opportunity is massive”, adds Wheatcroft.
Open to discussionsWith COVID-19 wreaking havoc across the business community, awareness of the need for it is growing among business leaders too. Friargate Financial Planning corporate protection specialist Dave Richards has witnessed increased willingness from clients to talk about business protection.
“It is highly unlikely that a business in the UK either has not been affected or won’t be affected in the future by the pandemic in some way. It has affected every single sector, both in terms of business owners and directors as well as their employees and associated families. All businesses have complex needs that have now become more complicated.”
“In living memory there has never been a more important time to talk to business owners about how they can protect themselves, their businesses, and their employees.”
Why don’t more advisers talk about business protection?If the opportunity is so big, why isn’t every adviser taking advantage of this situation? According to Swiss Re’s Ron Wheatcroft, transacting business protection does require slightly different skills, so it is not for every adviser firm. For example, it is important to ensure that the policy is set up properly and that the tax consequences for the premiums and benefits are dealt with upfront. “Of course, the more advisers wishing to acquire and use those skills the better, but help is available for those more comfortable advising on either personal protection or investments.”
So what should an adviser do if they do not feel comfortable talking about business protection with clients? “Skill up!” says corporate protection specialist Dave Richards. By drawing upon detailed guides, fact sheets and the plethora of information available online in the form of training, webinars and research material. “I also find that talking directly to providers helps as they all have business development managers (BDMs) and account managers that are extremely knowledgeable about their products.”
For those who do not wish to discuss business protection to clients themselves, signposting to BIBA’s Find Insurance service4 or warm referral of leads to industry peers who can is another way to help grow the market. “There are a number of other arrangements in the market where individual cases or lines of business are supported by such an arrangement,” says Wheatcroft.
“Business protection is an ideal area for such collaboration enabling advisers to develop a more diverse business with the potential rewards that can bring.
“Conversely, advisers who are already comfortable and have the skills to write business protection have an opportunity to build connections, both with protection and investment advisers and, additionally, private medical insurance and general insurance (GI) intermediaries who will be experts at arranging the various compulsory and non-compulsory GI protection products.” That way, everyone wins.
Find out how Vitality can meet the business protection needs of your clients.
2. Business Population Estimates 2020: BEIS
3. Swiss Re Term & Health Watch 2020
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