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Advisers who are wary of the business protection market may be missing out on lucrative opportunities. Alun Beynon answers some need-to-know questions

Why is so little business protection written in the UK?

Business protection includes commercial lending, key person insurance, director/shareholder protection and partnership protection. The last three categories are the most overlooked. A number of factors have combined to suppress sales levels. These include:

- A lack of awareness at client level that there is a need for such cover.

- In some of the larger adviser organisations, business protection is frequently overlooked because it can be covered by neither corporate financial planning nor personal financial planning.

- Advisers are not confident in broaching the subject with key high net worth (HNW) clients - not least because business protection needs to be proactively sold.

- Some provider service standards have caused advisers a lot of concern in recent years and poor service can threaten to undermine the relationship between the adviser and client.

Two things need to happen. Firstly, providers need to raise the profile of business protection in the market, instil confidence in the adviser community and show they are equipped to efficiently handle this potentially lucrative income stream.

Secondly, advisers need to be more proactive in identifying new clients and engage more meaningfully with existing clients to capitalise on the potential business protection offers to grow their businesses.

There are few branded business protection propositions in the market - why is this?

A number of providers have structured their overall protection propositions around their ability to transact business electronically.

While this can deliver an efficient and effective - but ultimately rigid - service capability for the volume-based personal market, it is not believed that business protection sits comfortably in a mould that has been designed just to process volume.

The dynamics within the business protection arena are very different and this creates a different set of challenges and opportunities.

Is business protection less sensitive to premium rate than personal protection?

Given the expenditure many employers are willing to lay out on recruitment fees for key personnel you would think so, but experience suggests there is still too much focus on cheapest premium.

This can be attributed to comparative quote portals (CQP) which have inadvertently, over a number of years, led financial advisers to think the cheapest rate correlates with best advice.

While we recognise the importance of CQPs, there is also a need to recognise that they only give us part of the picture. For example:

- They do not tell us how well geared a provider is to efficiently process a large sum assured case.

- They cannot tell us what the medical underwriting capabilities of a provider are - whether a case is going to attract ordinary or loaded rates. This could turn the comparative quote list on its head.

- They do not tell us providers' financial underwriting limits. This could be crucial in underwriting a case smoothly.

- They do not tell us how products compare on flexibility and future options.

There should be many considerations beyond rate for a financial adviser in selecting a business protection provider.

With a bit more pre-sale research advisers can look to ensure they really are marrying their client with the best provider.

What cover options are available to meet the demands of today's executives?

Historically, key person and share protection have primarily been covered with life assurance - but we have seen a shift in recent years to include critical illness and temporary and permanent disability on a first event basis.

Income protection, however, underpins the financial planning process for personal protection and the same could be said of business protection.

It is estimated that one in five Britons will suffer from depression at some point and it costs the NHS around £8bn each year. What this costs British industry is unknown. However, the gap in the market is obvious.

What levels of sum assured are typically requested and are there any constraints on cover?

Over the years many advisers will have listened to presentations on business protection that will have, in hindsight, had too strong a focus on the really big cases - multimillion pound sums assured.

These have served to highlight the underwriting capabilities and credibility of a particular provider and, while this is very important, such presentations have failed to connect with the majority of advisers, who rarely come across such cases.

The average business protection sum assured is around £260,000 and these are frequently linked to commercial lending.

We also need to recognise that arguably the greatest need for key person cover is in small and medium enterprises - the success or failure of which rely to a great extent on one or two people.

The sums assured in these cases need not be huge but sufficient to cushion the blow of losing a key person.

Regarding constraints, while there have been well publicised reductions in case size capacity for critical illness cover across all providers, the fact is that cover of up to £500,000 is still commonly available.

Some providers are able to offer £1,000,000. Key person income protection carries a maximum benefit of £250,000 a year. Also, financial underwriting considerations could cap the level of sum assured required for a particular risk.

Are intermediaries put off by a lack of familiarity with the legal agreements that often need to accompany business protection cases?

There is a perception that this adds more complexity. However, many providers offer help in this area with sample wordings for agreements and general information on why they are needed along with suitable trusts.

We always advocate seeking professional advice, and doing so is potentially a great way of generating reciprocal business and developing professional connections.

There is a perception that underwriting requirements are too onerous - is this fair?

No. Because of the generally higher sums assured involved with business protection - together with the fact applicants tend to be older - a greater proportion of cases will require GP reports and medical evidence requirements (MER).

However, some providers have been trying to focus on improving their business processes and this includes optimising underwriting efficiencies.

As an example of this, automatic MERs have increased.

Typical examples for a general practitioner's report are £600,000 for a 35-year-old and £400,000 for a 45-year-old.

Additionally, from a financial underwriting perspective, underwriters will look to ensure the sum assured is consistent with the risk profile of the applicant.

Even so, additional supporting financial underwriting evidence is not requested until the sum assured reaches a certain level, so most business protection cases shouldn't be affected by financial underwriting.

The limit varies from provider to provider - between £400,000 and £500,000 is typical.

Hopefully, any prejudices about onerous underwriting requirements can be dispelled quickly.

What additional support could providers offer advisers to encourage increased sales levels?

As has already been implied, selling business protection generally means selling to important HNW clients.

The level of success is highly geared to the confidence the adviser has in managing such enquiries, which itself is heavily influenced by the level of confidence the adviser has in the provider he is recommending.

Additional aspects of support advisers should look for from providers include:

- A specialist sales unit which regularly deals with business protection enquiries.

- Field underwriting capability - where underwriters can visit the premises of corporate clients in confidence when sensitive commercial deals are being planned.

- An underwriting helpline giving direct access to underwriters for assistance with pre-sale underwriting queries. This helps advisers manage client expectations.

- Immediate cover facility. The immediacy requirement will depend on individual circumstances, but having the ability to assume risk pending the underwriting process can be a invaluable facility.

- An accountable large sum assured processing unit that has developed a specialist understanding of the vagaries of this lucrative market.

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