Now, however, the UK’s thousands of SMEs are joining the auto-enrolment revolution and many will be contacting their advisers, accountants and payroll companies to discuss how best to implement the new pension schemes. This is a great opportunity for advisers to use the auto-enrolment discussion to raise the important issue of business protection insurance.
It is crucial that the industry works to raise awareness about business protection amongst smaller firms. Legal & General’s research has shown that 40% of businesses would cease trading within a year in the event of a key person dying or becoming critically ill. Yet the majority said that this was not a risk that they had considered before. We’ve also found that 2/3 of businesses carry some form of debt, with SMEs on average owing £350,000. This is a substantial sum which has the potential to cause serious damage to a company if sales were to suffer, yet despite this over half of the companies we interviewed did not have the protection they need to mitigate against the loss of a key member of staff. There is also a clear appetite for these products too, once the risk has been explained. More than a third of businesses interviewed saw the death or critical illness of an owner or key employee as the greatest threat to their operations.
In the insurance industry we are always aware of the need for advisers to find new hooks to talk to SMEs about protection and how it can benefit their businesses. Auto-enrolment is an excellent opportunity for the industry to reinforce that point of view, with more than 1 million small and micro employers staging auto-enrolment over the next 3 years. Our research has shown that only half of businesses (excluding PLCs) use an adviser, but with SME auto-enrolment it’s increasingly likely that this number will rise, especially with the government writing to these smaller firms about their regulatory duties and encouraging them to contact an adviser.
Ultimately, this means that there is now a significant opportunity for advisers to advise on other products, namely business protection and Relevant Life Plans.
To make the business of advising smaller firms on auto-enrolment more of a revenue-generator for their firm, advisers could look to sell in the benefits of business protection products as well. Even a small company with just 3 owners could represent a good business opportunity for an adviser. If each owner were to purchase a relevant life plan a shareholder protection policy and a key person policy this could net a total annual premium of £10,800 (assuming Legal & General’s average business protection policy size of around £1,200pa), not to mention the potential leads that could be generated from the staff of the business.
Ultimately, offering business protection on the back of auto-enrolment benefits both parties. Advisers can expand their business protection market on the one side, whilst their SME clients receive the advice they need on auto-enrolment, as well as essential protection to secure their businesses from any critical events.
