In 2020, Guardian surveyed 421 advisers around the willingness of their clients to talk about protection. Of the advisers surveyed: 75 per cent said there had been an increase in willingness by clients to talk about protection; 83 per cent who ‘didn’t always talk about protection’ are now discussing it more frequently; 37 per cent had seen an uplift in protection enquiries from new clients; and 39 per cent had seen an uplift in protection enquiries from existing clients.
Another study showed that almost one in three respondents stated that they will be more careful in understanding exactly what their insurance policy covers them for.
From a propositional perspective, this means that clients are looking under the bonnet of adviser propositions now more than ever to understand the value of advice.
Legal & General conducted an interesting report where they surveyed 800 SMEs as part of a research piece called “State Of The Nation”. The sixth edition of this report stated that 84 per cent of UK SMEs have taken out a business protection policy because they were advised to do so by a financial adviser or bank. The report also revealed that 70 per cent of business owners had not heard of Relevant Life.
Key Person/Loss of Profit Cover. As Henry Ford once said, “you can take my factories, blow up my buildings, but give me my people and I will build my business right up again.”
Many business owners agree that the loss of a key person can have dire consequences for their business, yet in 2019, more than 50 per cent did not have any cover in place.
One reason for this was cost, and when asked to estimate the cost of insurance, the average response was almost 3x the actual cost. 52 per cent said they would cease trading within one year once the consequences of having no cover were explained to them.
These policies may also qualify for tax relief on premiums subject to the Anderson Principles being satisfied.
Business Loan Cover. This type of insurance is hugely relevant now and generally consists of either life assurance or life assurance and critical illness cover (CIC) written on the life of a key individual(s) so that any money due can be used to pay towards any outstanding debts or loans.
Businesses borrow money for several reasons but may not consider how they would service these debts if they lost a key person, thereby potentially risking their personal wealth as a security for borrowing. In 2018, 51 per cent of businesses had some form of business debt with only 20 per cent of those using a protection policy as security.
Of those who do not have Business Loan Cover, 70 per cent did not see the need or had not considered it. Similarly, with Director’s Loan Account Cover, 28 per cent are unaware that this needs to be repaid on death.
