Paul Avis discusses the benefits and pitfalls for advisers considering the group protection sector.
The main issue for advisers over the next 12 months will undoubtedly be how they prepare and adapt for the Retail Distribution Review (RDR). The additional requirements, which include further qualifications and possibly coping with the loss of clients who are reluctant to pay for advice that they had reviously thought was free, means we may see a fall in the number of advisers who continue to practice.
But the group and individual protection markets have been granted exemption from the stipulations of RDR and therefore may prove an attractive income stream or new growth opportunity for advisers in these turbulent times.
For those advisers who sell individual protection, the group market holds opportunities that make it a worthwhile consideration. However, it is crucial to approach group protection differently because it is an entirely different proposition to sell.
First, it is worth considering the ‘value-adds' that come with these benefits and how they might help to reduce the cost of employee absences and sickness to the business.
Mental health problems
Analysis of our group income protection (GIP) claims data found that 31% of claims are for mental health problems, which can be notoriously hard for organisations to deal with.
In a difficult economic and employment climate, employees are finding themselves under more pressure to deliver, often with few resources. If workplace stress is not dealt with early on, there is the reasonable chance that it will snowball until the employee finds themselves unable to cope and possibly signed off from work.
On a company level (specifically relevant to SMEs), this is a worry for employers who are concerned about the wellbeing of their employees. However, there is the business and cost aspect for the employer to consider as well. If an employee is absent, there is obviously the problem of covering their workload, which can incur costs.
If the period of absence is lengthy enough to warrant drafting in someone to cover this, it may be that time and money is spent on training a replacement to carry out the job, or that there are difficulties faced in sourcing suitable temporary staff.
At a time when employers must be compliant with a whole series of employment legislation, group protection includes value-adds that can help to reduce the risk of employment tribunals in a way that individual protection may not.
SMEs in particular may find that they struggle to fully understand their responsibilities to employees, as a result of legislation such as the 2010 Equality Act.
