With two providers launching new business insurance products for intermediaries so far this year and Directline trying to get in on the action with its direct offering, which it launched in September last year, this is clearly a market that insurers think has been overlooked.
Swiss Re estimates the business protection gap in the UK is around £500bn. Last year, Aegon Scottish Equitable reported a 44 per cent growth in the number of polices taken out year on year and new products from Bright Grey and Unum have given advisers something new to tackle this market.
The Bright Grey product offers a menu covering keyperson cover, loan protection and ownership protection.
The new Unum product offers a dual benefit group income protection where both the employee and the employer can receive benefits if the employee is unable to work.
Friends Provident is also becoming more active on business insurance after its decision to concentrate on protection.
Sesame research manager Dale Tranter says : “Over the last few years, there has been a falling off in the number of individual policies sold, so companies are looking for different people to sell protection to.”
Bright Grey product director Roger Edwards says: “It is a more complicated area of the market, with business trusts, corporate tax relief and cross-option agreements to consider.”
CBK director Peter Chadborn believes that life offices reducing consultant support hit the IFA sector. He says: “IFAs have not had a relationships with providers that has enabled them to discuss the minutiae of business insurance products.”
He also points to the perception among advisers that selling corporate insurance policies “means going and making presen-tations to a board of direc-tors and the chairman”.
Another factor has been the time it takes to get a policy on risk. Edwards says: “Although the sums assured are higher, it takes longer to complete. It could be between two to three months for a smaller business and six months or longer for a very big firm. This does not fit some IFAs’ business models.”
IFAs have also tended to consider the personal needs of clients, such as pensions, investments and protection, as separate issues to business insurance.
Lakey says: “It is easier to talk about personal affairs than business affairs as most clients consider them to be separate. “
But for clients that run their own businesses, corporate insurance might be more important than individual protection.
Small businesses are often reliant on the ability of a few crucial members of staff and if they are unable to work the business can be in difficulty.
Edwards says: “A small restaurant owner may rely on the talents of one chef and urgently need keyperson cover.”
Another advantage of business insurance to IFAs is that it is not so dependent on other sectors, such as the mortgage market.
Friends Provident head of protection Mark Jones says: “It is an area of protection that is not as closely aligned to today’s more volatile mortgage market.
“Businesses tend to have much bigger needs, liability values and, most important, budgets, so there is more scope for affording the costs.”
Edwards comments: “The complications are not insurmountable, it needs commitment rom IFAs and providers to learn the ropes.”