Optimal's Nigel Hartley argues that the industry is missing a trick by neglecting new group life business.
While that information certainly supports the view that the death in service market is healthy and growing, I wonder whether we as an industry, whether provider or intermediary, are missing a trick by neglecting the not insured market.
The Pension Regulator states that almost 1.8 million firms are due to stage under Automatic Enrolment over the next two years.
Furthermore, the number of individuals not covered by any current death in service scheme is estimated to be in excess of 16m so should we, as an industry, be focussing more on virgin scheme business?
I believe that the answer has to be an emphatic yes but if we're not yet doing so, why not?
Based on research and conversations with Optimal's intermediary partners and with small business owners there appears to be two reasons why not; firstly, the raw economics for advisers and secondly the complexity of setting up new schemes for both advisers and their clients.
Looking at that first point, if average rates of commission are around the 10% mark on group life schemes and average premiums in the micro and SME sector are under £2k then the average commission earn is clearly less than £200.
At that level, even engaging with a client about group risk is likely to cost an adviser money and that's before any work is done obtaining quotes from the market, designing or assisting with scheme specification, obtaining PSTR number and advising on Trust documentation!
Why would any of us wish to start a conversation that we knew was ultimately going to cost us money?
The alternative is to charge the client a fee for assisting with the scheme set up but how is a client going to view even a £500 fee to set up a scheme if the premium for the cover is only, say, £1k?
Will the client view that as good value? Even if an adviser is willing to look beyond the economics does the client want to engage with a process that is lengthy, potentially involves interaction with HMRC, perhaps requires some Trust documentation with inherent Trustee responsibilities and maybe involves an element of individual underwriting?
Too many reasons not to effect the cover, perhaps?
Optimal believes the answer lies in simplification.
With a number of providers now offering simple group life products, the options for advisers to target these smaller, say sub-thirty, life schemes should now have become more economically attractive.
With reduced administrative burden and supported by master trusts or, perhaps, simply the clever use of data that is already being captured, it is now possible for advisers to obtain quotes and place policies on risk much more quickly.
Some of those solutions, however, still require membership data, the collation of which all advisers tell me is a weakness that cause aggravation and delays for clients, advisers and providers.
Consequently, some providers, such as Optimal, have extended simplification even further and completely removed the need for membership data at commencement of cover.
With the ability for advisers to get quotations and put policies on risk in as little as five minutes or to allow the client to operate on a "self-service" basis the ability to target the micro and smaller end of the SME market, is now a reality.
All that advisers have to do is target those new clients, the majority of whom will probably be looking for support with AE and then to promote the Optimal solution for group life.
Nigel Hartley is managing director of Optimal
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