Providers rush to launch business protection plans
There is little point in questioning whether now is the right time to extol the virtues of business protection. Despite the continuing ill-feeling and dread about the potential of the credit crunch, providers that have previously shied away from the product now seem to be queuing up to launch offerings. Skandia has recently launched into business protection and it has been reported that Royal Liver has been looking at opportunities around the product.
But since providers are generally run and managed by smart people and launching a protection offering is not without risks, surely there must be a sense of wariness when it comes to launching new products in a shaky economic climate? The simple answer must be if a provider is not cautious about what could happen, then it must see any crisis in the financial markets as a chance to profit.
Writing in December's COVER, Jerry Bayman, national partnership manager for business protection at Bright Grey, said the business protection market was attractive to providers for three reasons. Firstly, there was the ability to reduce market risk by widening the business base. Secondly, business protection generates higher premiums and therefore more profits, and, thirdly there was a significant gap in the market. Those assertions may be true but would not explain away the perceived risk in launching such a product while the world's economies are churning.
Right now, there seems to be a definite call for business protection yet, defying expectations, it seems to be coming from advisers seeking to replace lost revenue streams rather than businesses trying to protect themselves. The suggestion then is the economic climate has opened up little opportunity, if any, for business protection sales and that demand is being driven by advisers.
It is beyond debate that business protection has traditionally been undersold, partly due to its reputation as a tough sell to businesses but also because of the apparent complexity of the context in which the product operates. Advisers may be reluctant to advise on issues of taxation and may feel uncomfortable around such concepts as partnership agreements and articles of association. With the continuing trend for consumers to complain when they feel slighted or misinformed, it is understandable why this may be so.
Using one product to fill a vacuum left by another may be good for advisers in the short-term but what will the effect be once the economic crisis has passed? Will the business protection market suffer or flourish from such attention?
