Paul Avis challenges the orthodoxy that automatic enrolment will also boost group protection sales.
The Chartered Insurance Institute (CII) in its ‘Are we in it yet’ report into small business and AE found that about 30% of small firms would turn to an adviser for guidance and 25% to a provider, with about 30% relying on self-advice.
The Pensions Regulator report of Spring 2013 suggested that 38%-43% of the sub-250 employee organisations would turn to a financial adviser, IFA or broker for AE advice compared with 40%-55% to a pension provider.
In contrast, 84% of micro employers of one to four employees would turn to an accountant, so perhaps there is an adviser opportunity for transactional work there. What both of these reports tell us independently is that AE advice will be sought through a traditional intermediated model.
However, with the challenges around resourcing and a possible fall-out of both adviser and providers’ support for small and micro employers, it will only be NEST and other AE organisations that will service the pension aspects of AE needs.
So who will service the group risk needs of these ‘new to benefits’ organisations? Where does that leave us as an industry? First, every adviser should routinely quote group risk for every AE client, as they have the data needed to do so.
Rather than quote the most expensive benefits profile, quote budget options and talk about the value services that insurers offer, because many are appropriate in this market segment.
Gip and pensions
Although death benefits fill the benefits gap if someone dies before they retire, it is often forgotten that GIP aligns closely with pensions as pension contributions coverage on top of core benefits - almost a waiver of contribution - ensures pension protection in later life.
This means that the appropriate investment plan is fulfilled and an income is provided in the interim should the employee fall sick. However, death benefits quoted at fixed levels (£25,000-£50,000 can be set up with the simple information that, on top of your 1% employer contribution, for an additional 0.25%-0.5% of pension contribution you can protect yourself and employees with death benefits.
As for group risk advisers, please tell us what you want and we will try to accommodate you. For those of us that have no pensions book to cross-sell group risk, it is increasingly important for us to stay as intermediated as we can. We need to provide some clear reasons to buy group risk through an adviser.
Alignment with differential distribution chains may be on the horizon (banks, accountants, and pension or software providers), but the commitment is to grow the market through the intermediated channel.
However, with the ‘glass half empty’ take, consider this article as the gauntlet being thrown. We cannot maximise this opportunity without adviser support, but perhaps at some point we may have to consider doing so.
The acid test will be the 2014/15 ‘new-to-market’ scheme numbers, not employee numbers or premiums , because we are confident that the farming consultancy will happen. It is the opportunities we hunt down that will make AE a brilliant success for group risk.
Paul Avis is marketing director at Canada Life Group
