View more on these topics

Price is not always right

More IFAs are looking at employee benefits as a valuable means of business development but what are the key issues they will need to take into consideration when looking at this market?

Let us start with group life cover. Price is often cited as the key driver in influencing placement of this type of business with any provider. If this was all an adviser had to consider, life would be easy.

Although price certainly needs to be reasonable, there are a few other factors that should be taken into account before deciding which provider to recommend. Some would argue that the provider&#39s underwriting requirements and claims&#39 handling practices are equally, if not more, important than price.

Underwriting on a group basis will bring an element of free cover. This is one of the most important pieces of non-pension jargon an adviser needs to understand. Although, to the uninitiated, free cover conjures up a picture of risk providers offering something for nothing, the reality is actually much more valuable, allowing an element of cover for all employees joining the scheme without any medical evidence at all.

The level of free cover available will depend on the number of members, the level of cover being provided and the benefit spread across different categories of members.

Some providers will also base free cover levels on the number of potential members who could join, rather than the more traditional basis of actual members only, producing more generous results.

Higher amounts of free cover mean fewer members will need to provide medical evidence or undergo a medical examination. There will also be less disruption to the client&#39s business operation.

Add to this speedy acceptance of cover and you start to appreciate how important this aspect can be.

Claims&#39 handling is a critical area to get right, given the sensitive nature of the claims under consideration. For group life, advisers need to be able to trust the provider they recommend to handle death claims sensitively and promptly, minimising any potential comeback from the clients that would tie up their time unnecessarily.

Where an adviser is recommending group life to run alongside a stakeholder or group personal pension, another consideration is whether to adopt a bundled approach by using the same provider for each element.

If price were the only consideration, then the bundled approach would win in terms of both the direct costs and indirect cost savings.

The provider&#39s approach to data collection, quote handling and take-on procedures can go far to minimise duplication of effort for the adviser and client. This should be factored into the overall equation when weighing up any recommendation.

An adviser&#39s time is precious – never more so than in the 1 per cent world – and providers which can deliver a bundled approach smoothly can help an adviser maximise their business potential and provide an added-value solution for the client.

Cheapest price may seem like a quick fix but advisers would do well to remember that you only get what you pay for. Cheapest is not necessarily best but, if it goes hand in hand with competitive free cover, excellent claims&#39 handling, smooth take-on and customer service, the adviser will be helping deliver a real value-for-money solution for his client which can be built on in the years ahead.

After all, group life is only a starter. Group income protection is another area advisers can explore to help strengthen their relationship with their clients and address some of the very real business issues those clients are having to face in today&#39s competitive market.

Some employers may shy away from employee benefits because the perceived initial cost is too high. However, the rehabilitation services within a group income protection plan, for example, can really have a positive impact on the bottom line.

Recommended

FSA welcomes Equitable compromise proposal

The FSA is keeping Equitable’s financial position under continuous review and has obtained it own legal advice about the size of mis-selling claims.It says without the compromise, the outlook for the with-profits fund is further uncertainty and instability. It believes the scheme published today is a ‘sensible basis’ on which to consult policyholders and says […]

Only 36% pass first half-credit K10

Only 36 per cent of the 635 advisers who took the first sitting of the Chartered Insurance Institute&#39s new K10 paper covering retirement options passed the half-credit qualification. The CII is disappointed at the low pass rate but says it illustrates the standard has not been watered down by creating half-credits at an AFPC level.

Service will analyse tax-efficient investments

Venture Capital Trust pundit Martin Churchill is to launch a new service for IFAs, providing news and analysis on the tax efficient investment market.The service, to be called The Tax Efficient Review, will be launched at the end of September although its website is already live at www.taxefficientreview.comChurchill, who until recently ran IFA Allenbridge&#39s Tax […]

Michael Bolton

Michael Bolton is not a man known for his reluctance to express an opinion on anything from the future of securitisation to the comeback of the mini-skirt. Something of a character in a market beset with blandness, the “Big Bopper” (watch the man dance) has risen up the ranks with a refreshing lack of verbal […]

Creating opportunity out of change

By Denise Wond, marketing manager The buy-to-let market has recently been the subject of a raft of tax changes, all of which make it a less profitable and less appealing proposition for investors. In response, we’ve seen a dip in demand for BTL mortgages and that’s bad news for many advisers who will now be looking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment