Alan Sparks looks at how advisers can improve their offering to existing clients and expand the market
Admit it: you are really waiting for the news on pension tax relief. However there are things you can do now around Group Risk provision that will help your clients and potentially grow your business which fall into two opportunities: to grow the market and to consult on existing schemes.
The chance is right in front of advisers for significant market growth. This comes in many forms but it is worth looking at a few simple ideas. The single biggest opportunity is on the back of automatic enrolment (AE) pensions implementation.
Between now and 2018, the 1.8 million employers (1) going through staging provides advisers with many openings to win corporate clients.
These might be leads from other professionals such as accountants or requests from existing personal clients for assistance with their business. With every employer providing a pension, there is a need for a benefits differentiator.
Group risk, specifically group life, is the perfect partner to AE and can be used both to increase revenue and to maintain a post-implementation relationship. A simple group life product is proving to be popular as an initial starting point as it can be easily quoted for and administered online.
Another area for expansion is group income protection (GIP). The questions to ask are: how aware are your clients of the level of state benefits, how difficult are these benefits to obtain with the ‘any occupation' definition of disability and do they understand the benefits that are initially paid to an absent employee will change over time as their personal situation changes?
So as an employee of an organisation, I would want to know how much income I would get if I were sick, who from, how I will be assessed and for how long I will be paid this benefit.
In the current, complex state benefit world the specifically personalised nature of these benefits means that few, if any, employees have such clarity.
At a basic level can anyone live on £3,801 per year? Could this fact shock most employers into action as they consider their own situation let alone their colleagues?
‘All employee' schemes
The other area of growth is to consider expanding some existing schemes which currently have restricted membership.
The use of pension scheme eligibility was historically popular but the introduction of AE now means that most, if not all, employees are pension scheme members.
An ‘all employee' scheme will usually have a lower average age and therefore lower unit rate (ie, a lower cost per £benefit but not necessarily a lower premium).
In addition, the expenses of pension scheme membership are higher as insurers could be selected against by people joining the pension to get the death or disability scheme benefits when they know they may need it.
In addition, everyone has the extra workload and costs of medical underwriting late or discretionary entrants.
Many schemes still have executive/limited membership. By expanding schemes to include other categories, employers get budgetary certainty through unit rating and also free cover limits are higher, so there is often no medical underwriting.
It is also important to look after existing clients ensuring their benefit offers remain relevant.
This could be a move to flexible benefits and online communications but there are some basic changes that can be made to specific scheme designs.
Legislation and regulation will often be the drivers for this and some schemes are not up to date. For example, termination ages still need to be reviewed in some cases.
The removal of the default retirement age requirement occurred in 2011. An exemption for insured benefits was negotiated by GRID.
This means every cease age should now be at least "the greater of 65 or state pension age (SPA)" but regrettably it is not, especially for GIP where there is a cost to doing so.
Unbelievably there are still schemes with differential male and female termination ages and end dates of 60 or 65 still permeate some traditional scheme designs.
