No longer just an insured benefit, group IP is making waves with a range of additional features and is set to benefit from auto-enrolment and changes to the default retirement age. Nicola Culley finds out why it could be a gold mine for advisers.
“Auto-enrolment could mean more awareness and more advisers having these conversations about group IP as an opportunity. But advisers will really have to be at the top of their game and be on the ball.”
He added that advisers tended to get into a rut and were only comfortable advising on what they have always known.
Pressing issues
Government benefit reform is an area L&G is fielding lots of queries about at the moment. It is also something group risk specialist provider Canada Life has reported. But Paul Avis, sales and marketing director at Canada Life, said auto-enrolment was the “big one for advisers” and group IP.
He said: “You also have the complexity of state benefits. As soon as you begin to mix up fixed benefits and state benefits advisers get nervous. And large and small advisers alike have been slow to talk to clients about the default retirement age exemption.
“But the more pressing issue is that every group scheme will have to be amended to take account of all employees becoming pension scheme members with auto enrolment coming in.”
Employers with existing group IP will have to honour those benefits. Amendments will demand a complex consultation programme to change them. Avis said it was a good idea not to close schemes but keep existing benefits and introduce subcategories. For example, it would only be available for those who have been in the company for more than two years.
He said: “Auto-enrolment will provide advisers with an opportunity to talk about benefits packages and the benefits of Gip.
“Advisers have good awareness now about what the product can offer. But sometimes is not about just offering the Rolls Royce of packages and offering 75% income replacement. Maybe look at 50% if cost is proving a barrier.”
A one man band, Avis said, had 20 to 30 product areas to talk through by themselves so it could be very difficult. In comparison to the larger firms, which had different specialist teams, he added. But Avis said advisers, big and small, needed education.
“The larger guys will be taking on new entrants to grow as part of succession planning so there will be a big demand for education there,” he explained.
“A small adviser has to make a conscious decision to enter the group risk market and engage with it. And the start point will be to seek educational tools.”
Regardless of size, there are myriad variables to tackle if advisers want to bring group IP on board. But if they crack the nut, market trends suggest it could be the next best thing.
