Of all the protection products, business protection should be the most widely purchased after personal cover, rather than one of the least. Data on sales is scant, but back in 2012, Scottish Provident found that less than a fifth of small firms take out this type of cover, and recent research suggests that take up hasn’t really changed over the years.
My personal view, based on our data and advisers’ sales, is this may now be way too high an estimate, especially when you consider that there are now over 1.3 million private sector businesses that employ someone, and also the opportunity in the self-employed market. Whether it is keyperson, relevant life or just a term product to protect a business loan or other financial commitment, the need for protection is vast.
At the heart of the problem is once again the adviser gap. While most smaller businesses will employ an accountant their role is largely non advisory in the general sense of running a business, other than the production of the annual accounts and possibly VAT and payroll issues. Similarly, most businesses don’t regularly need legal support and when they do it’s for a specific need and not generic advice.
We employ around 95 people and recently undertook a management buyout and I’m pleased to say that our solicitor discussed with us the need to look at both shareholder protection and keyman insurance as part of the ownership process. However, I can’t but think this is not a common conversation and would not occur often, especially where a strategic event doesn’t occur.
The reality is that the last time many business owners came into contact with protection sales is when they last moved house; the fact is that around half of all protection products are sold at this time.
While conceptually the needs to protect a home are not vastly different to protecting a business, few people would make that leap of their own accord and the reality is that few home or business owners would have purchased protection in the first place, unless they were guided to do so.
So what can we do? Firstly, it’s a great opportunity and we need to do much more to increase awareness of the need to protect the continuity of your clients’ business in the event of serious illness or death. Secondly, potential referrers need to be chivvied, the most important being accountants, commercial insurance brokers and lawyers.
The insurers who specialise in the business protection market have a wealth of ideas to help you grow this market. The quality of the information and marketing material is superb. It helps in explaining the need, identifying the risk, demonstrating the impact of an early death or critical illness, simplifying the calculations to identify the sums assured, and helping with any financial underwriting. In short, there is a lot of support for advisers entering this market.
If you ask an employer, the continuity of business is going to be front of mind. The ability to provide security, utilising simple protection products written in appropriate trusts, gives partners and directors confidence that even if there is a loss of a key person, the business can continue in the future. Keeping the business going ensures that all the personal cover, pensions and investments are, to a certain extent, covered as well – business protection for the client and you.
By making reference to your business continuity planning skills on your website, it not only reinforces your skills to your clients but also to your business introducers. It’s definitely worth spending a bit of time brushing up on this area.
Neil McCarthy, LifeQuote
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