We know two things:
· The RDR is coming, leading to a reduction in commission from pensions and investment planning
· The FSA is asking insurers to develop simple products.
Call me a cynic, but in this online “Compare The Market”, “Money Supermarket” world, I see this as a sign that personal protection advice could be contained within an e-commerce environment.
Price and standard requirements are enough for the majority. Then you look at the group market where increasingly sophisticated buyers place a greater emphasis on employee health and productivity. Pensions advisers are talking of doubling their risk and healthcare teams to replace lost pensions and consulting incomes. Price and product flexibility are in a great place.
So how might advisers get into group risk? Firstly, review your personal protection sales. For individuals, the costs can be much higher than group cover and do not benefit from non-underwriting limits to limit medical evidence provision. All employees have some cover if they are actively at work on the day the scheme starts. Only group critical-illness has a pre-existing condition clause! Secondly, look at your pension clients – by covering their contributions under a group income protection scheme you provide a waiver of premium, ensuring employees get the retirement income they were expecting despite ill-health absence.
Costs can be lower than expected. £10,000 pounds life cover, critical illness benefits and a two-year limited benefit payment GIP of 50 per cent salary comes in at £110 per employee per annum. Deducting 26 per cent corporation tax reduces this figure to £81.40. With the recent success of cash plans starting at around £50 per employee per annum, group risk packages suddenly become more attractive.
GIP products often come with free employee assistance programmes, which could otherwise cost £5-£25 per employee per annum. They may offer online and telephone legal support – for smaller employers licences from suppliers can cost £1,200-£2,000 per annum for such equivalents and, even for larger employers this means legal updates without costs. If a second diagnosis service is in place, it supports treatment certainty for experience-rated private medical schemes, so may help limit costs as well as providing peace of mind. Group life schemes offer bereavement and probate help lines to support the employer and onsite nursing support may be available under group critical-illness schemes.
The group risk world is proposition rich. It supports individuals and their families, protects employers and helps them reduce their costs, and provides an ongoing commission.