Right on target

More advisers are becoming aware of the fact that the business protection market offers a wealth of new business opportunities and there is no shortage of statistics pointing to this trend. Swiss Re has calculated that if all businesses in the UK were to take out key person life assurance cover to the value of £250,000, the total initial commission payable to advisers would amount to £1.29bn. This is undoubtedly a tantalising opportunity which few advisers would care to ignore. But what is the best means of approach for advisers looking to tackle this market?

Addressing the issues

Advisers agree that there are three basic issues to be addressed when approaching the corporate market for the first time.

The first is to ensure they are speaking to the right decision-maker within the company. For example, while the human resources manager might be the best bet for group risk benefits, it may be the finance director or managing director who deals with key person cover. Getting in contact with the right executive is vital.

The second issue is that of trust. This is of paramount importance in all areas of financial planning, but especially in the business market, where confidentiality can affect the running of the business.

The third consideration is delivery. If the adviser is talking to the right person in the organisation, has gained their trust and can then deliver solutions within agreed timescales, they are well on their way to forging a lasting and valuable business relationship with their corporate client.

There are a number of ways to get an initial foothold in the corporate market. The best and sometimes most effective route is by way of a professional introduction.

Making contact

Here is where it can be beneficial for advisers to strike up and maintain professional relationships with, for example, accountants or corporate lawyers. A referral from the business accountant can often prove valuable and go a long way in overcoming the challenge of gaining the trust of a business executive. Accountants often deal with the tax arrangements of a number of local businesses and can, therefore, prove a worthwhile contact.

These days, many small businessmen belong to trade associations or are members of bodies such as the local chamber of commerce. These can provide a useful way for advisers to make new contacts in a professional environment. Another way into the market is through client relationships which the adviser may already have with key executives, perhaps through arranging their personal finances.

Alternatively, direct marketing could offer a way in. But advisers should be aware that this route will involve a good deal of research and groundwork to ensure the right businesses, for example the most successful ones are being targeted. The direct marketing campaign would usually take the form of a mailshot with follow-up phone calls and one-to-one meetings. With this approach, it may take slightly longer for results to emerge. However, once the adviser has struck up a strong link with a corporate client, it can often mean the start of a lasting professional relationship.

Modern menu-based protection products provide an ideal means for advisers to cement client relations over time, in both the corporate and individual markets. The ability to add or take away elements on the menu, or to increase or decrease cover according to the requirements of the business means advisers have every reason to keep in regular contact with their clients.

The business protection market, including products such as key person assurance and business loan protection, is an area which has so far been overlooked by many advisers. The fact is, however, that business protection can be as crucial to business growth strategy as investing in infrastructure and personnel, so advisers should be ready to highlight this to their corporate clients.

This is an area where client needs are implicit rather than explicit. Business protection may not be something which is uppermost in the mind of a client. But a corporate client may approach an adviser looking to implement a group pension scheme or employee benefit scheme and this can provide a catalyst for advisers to ensure that their clients are furnished with the appropriate protection.

Doing the maths

One historic objection to business protection has been the cost but this is no longer a valid argument. In a modern business environment where businesses shell out hefty fees to recruitment agencies to attract the best staff, surely it is an important commercial decision to ensure the business is protected against the impact of illness or death of key personnel?

Once the adviser has identified areas where the client may need to take out cover, there are a number of factors which may influence the decision of which products and providers they should opt for.

If flexibility is paramount, as may be the case for many businesses in the current environment, then a provider which offers a menu-based business protection product may be desired. It is rare that the problems faced by any two businesses are the same, and it is becoming increasingly important in the business protection market for products to be flexible enough to offer tailored solutions. This could take the form of a policy designed to protect the irregular repayments of a corporate loan.

Another example is where the client may only be prepared to pay an additional premium for certain benefits, rather than the premium for the total package originally proposed by the adviser. Here, the adviser will want to recommend a product which is flexible enough to fit in with the client's needs and need not involve certain benefits being lumped together.

Understanding the limits

Underwriting and reassurance limits can also be a key concern. In the corporate market sums assured tend to be considerably higher than those required for personal cover. Therefore it is important for the adviser to deal with companies that have the sufficient underwriting strength to take on this extra risk.

An important consideration here is the extent of the provider's medical and financial underwriting limits. The higher the limits, the more flexibility the insurer will have. The higher the reassurance limits of a provider, the more likely it is that the underwriter will be able to make an instant and final decision on the case.

This is an area where having direct access to the underwriting team can make all the difference to advisers. Trust planning using protection products is one area which is often important to small businesses, but where many advisers may be unfamiliar with the technicalities. Life offices that offer comprehensive technical support can, therefore, prove invaluable.

As well as products to protect the business and the key executives, group risk products, often as part of employee benefits packages, are proving increasingly popular with employers as they seek to attract and retain quality staff in an increasingly competitive labour market.

As with business protection products, a common objection from clients to employee benefits is the initial cost of implementing a scheme of this nature. However, it is not difficult for advisers to demonstrate to corporate clients the inherent worth of, for instance, a group income protection scheme which incorporates rehabilitation and claims management services.

This type of value-added service will reap dividends for employers as it aims to minimise absenteeism and the associated costs to the business, by getting employees back to work quickly following sickness or accident. Again, the argument of the cost of recruitment is relevant. If businesses are spending large sums on recruiting staff, it surely makes sense to take steps to safeguard productivity and retain staff. Employee benefits packages can be valuable in this respect.

Other areas that corporate clients may be interested in are pensions planning ' particularly in light of stakeholder legislation ' and investing cash reserves.

Business protection is an area where advisers can really make inroads if they have the right approach. The most effective way to enter the market is by making the most of professional connections and gaining personal introductions to their clients. Once the contact is established, the key to success lies with gaining the trust of the key decision makers, and the ability to deliver tailored solutions to different business needs. The choice of product is likely to affect the degree of flexibility which the provider can offer. Advisers should highlight the value of safeguarding businesses with protection and the value that group risk policies can offer to corporate clients. The corporate protection market is an area which advisers would do well to consider when planning their own future business strategy.