Paul Avis discusses the benefits and pitfalls for advisers considering the group protection sector.
Group protection not only helps to cut the financial cost of employee absence for employers, but also costs less to provide in the first place than personal insurance. The costs of covering an employee for lump-sum death benefits, income protection (IP) and critical illness (CI) under a group scheme can be significantly lower than if each individual purchased their own cover.
A great starting point to enter the group market is to review the personal insurances of individual clients and then gain an introduction to the organisation through its employees.
In turn, this may save their taxed income if the organisation adopts a corporate package, thereby removing the personal need (and noting group risk benefits are tax deductible for the employer).
It is inevitable that businesses will come up against the issue of long-term employee absence, and group protection schemes allow them the best chance of identifying these problems early on, and resolving them just as quickly.
Technological developments mean that advisers can alleviate some of the previous administration that was needed when selling group protection. Advisers can now use an online quote engine to produce a quote within minutes, create variants from the quote, or provide multiple quotes for different products at the same time.
Advisers can carry out much of their admin online, thus making the whole process quicker and more efficient, freeing up their time to go after further new business or deal with RDR work and training. They also have the chance to underwrite a large number of people in one go, rather than spend time working on individual clients.
There is also the view that individuals don’t necessarily prioritise their individual protection needs in the way they ought to. At a time when the cost of living continues to rise, along with prospective job cuts, people are making changes to their spending.
Some individuals take the view that they do not want to pay for iP or CI cover because they might not ever need it. It is perhaps strange that pension contributions continue to be made when protecting tomorrow’s income is sacrificed for the long-term protection that a pension provides.
Individual struggle
As they struggle to meet the cost of daily expenses, individuals need to focus on their immediate needs. The ‘It probably won’t happen to me’ attitude is a barrier to selling protection, teamed with the fact that many people do not want to think about providing for the worst (the effect that a death or critical illness has on a loved one).
However, it is vitally important that people have some form of protection buffer in place. No one wants to think about how they might cope without their partner or a parent or income, but it is better that they make provisions for this possibility than find themselves in the situation without any financial safety net.
As paying into an employer pension becomes the norm with auto-enrolment later this year, advisers need to talk to employers about introducing group protection schemes for their employees at the same time.
As individuals find themselves less able and willing to pay into an insurance policy privately, they are likely to appreciate the move by an employer to consider their welfare and that of their family, meaning that this can prove a valuable tool in supporting organisational and personal needs.
Paul Avis is sales and marketing director at Canada Life Group Insurance
