Some providers are increasingly targeting workplace and employer based routes to market. Is this going to become more common and should advisers be doing more in this area?
Declan White, Friends Life
Provider offerings to the employer market have developed at a pace, with an array of savings, protection and healthcare solutions available. This trend will continue with further corporate platform developments this year, as well as the introduction of the National Employment Savings Trust (NEST) and auto-enrolment from 2012.
These developments will undoubtedly provide an opportunity for advisers to increasingly engage with employers regarding benefit needs and any legislative requirements on them regarding retirement provision.
The key issue to working in the employer market is gaining access to it. Can you develop a relationship directly with a corporate client or gain access through a partnership with a pensions adviser?
An adviser who focuses on workplace savings, such as pensions and ISAs, may look for a partner that specialises in the provision of corporate protection and healthcare advice. Once access has been gained, the range of insured and non-insured benefit options are huge and, therefore, careful consideration needs to be given to understanding the drivers and needs that shape an employer's benefit strategy.
If access to the corporate market is difficult to achieve, it is important to remember that there is a huge individual protection gap that needs to be filled.
Research by Friends Life in their Coping Classes report suggests that 59% of middle income earners would not be able to provide for themselves and any dependants for longer than six months - and 79% for longer than a year.
While these worrying statistics exist, the need for protection will always be there.
Paul Edwards, Roxburgh Financial Management
We certainly feel that some larger providers will increasingly target workplace and employer-based routes to market.
However, we feel that this is likely to be more common in the mid- to large-sized employers, which the average IFA does not have exposure to in terms of corporate clients and - more importantly - with low-end, easy to understand basic products that require no in-depth financial advice.
Where providers are determined to get an increased market share, they have the resources and the pricing ability to do so should they wish, so it will be difficult to compete on price once the cost of adding independent financial advice is thrown into the equation.
Where advisers can gain the edge and really add value is with the growing small- to medium-sized companies without the HR resources that may be required to accommodate direct contact with product providers.
So, they will require an adviser in both this area and to research the market to ensure that the most suitable and cost effective strategy is in place for them.
The fact that some of the larger companies are going direct to the market may, in this case, prove to be positive for the IFA world as the small- to medium-sized companies look to upscale their own benefit packages, as an attraction and retention tool, to match or better the benefits provided by larger companies.
Ron Wheatcroft, Swiss Re
The workplace is already important for pure protection business, with 40% of all insured life cover and 75% of insured IP being through employer-sponsored schemes.
Critical illness cover through employer arrangements continues to grow steadily. With auto-enrolment potentially bringing many people into contact with financial services for the first time, employers can play a pivotal role, whether as a provider of benefits or as a facilitator of product purchasing.
Research for Swiss Re's Insurance Report in 2009 suggests that there could be strong employee demand for cover arranged through their employer, with 60% of employees saying that they were fairly or very likely to consider purchasing protection policies in this way.
How will auto-enrolment impact an employer's business? How might other benefits, provided or facilitated, sit alongside pensions and offer cover that is meaningful and relevant to employees and, importantly, to the employer as a recruitment and retention tool?
More broadly, how well is the business itself protected against unforeseen consequences, such as losing a key employee? These are all areas where businesses will need advice.
Looking longer term, it is clear that the government is keen to engage the private sector more as it looks to cut back on public sector costs. This will not necessarily mean that we will have the same products and propositions as today. Employers will be a key stakeholder in delivering this transition, and advice on how to adapt this to their business model will be key to its successful delivery.
Bill Leach, Zurich
Recent turbulence around the removal of the default retirement age has distracted from the valuable benefits that are provided by all employer-sourced group risk arrangements and the fact that these benefits have been long advocated by advisers.
The recent exemption for group insurance has sent a strong message to the market that the government acknowledges the value it provides. It seems ministers are keen to ensure that not only do employers keep existing benefits, but that they are be increasingly the focus of ensuring that employees are supported in sickness and absence.
The introduction of auto enrolment may well provide the external stimulus that will aid the workplace and flexible benefits markets. These have been steadily developing and are estimated to account for about 10 % of the group life and income protection market.
Where the solution for the employer is a retail voluntary one, the key will be to overcome the historic poor ‘take-up' by employees through early and continued engagement. Providers need to make sure that employees understand the benefits, such as reduced costs and ease of application, that are provided by being part of a wider group scheme.
In our view, the key to delivering these solutions for both advisers and employers will be efficient premium collection through pay roll deduction and a streamlined underwriting process that avoids -unnecessary delays and the resulting uncertainties in the levels of cover, ensuring greater engagement for all parties.
