Arranging a business protection policy can be as stressful for advisers as it is for the customers looking for this unique type of coverage. As a protection adviser, it can be easy to focus your efforts on some of the more highly requested personal protection policies such as life insurance and income protection, and allow your knowledge and expertise of business protection as a whole to gradually degrade. This can lead to some compliance-related issues which calls into question your ability to provide the best service to your customers and ensure positive outcomes as outlined in the Consumer Duty act. That’s why we’ve put together this article to serve as a brief refresher on the subject, while also identifying some of the challenges which have arisen recently that have made arranging a business protection policy that much more difficult. Hopefully, this will then aid advisers in making business protection a much more standout area of their propositions.
What is Business Protection?
An easy place to start when refreshing your knowledge of business protection is to make sure you have a clear definition of what it is. Essentially business protection insurance offers financial security for a company in the event an owner, shareholder or key employee is affected by critical illness or death. If a business is reliant on key employees or an owner to carry out essential day-to-day operations or keep up with repayments on business loans, then the loss of such an employee can cause major disruptions as the company moves forward. A business protection policy can therefore be arranged by an adviser so that this potential financial struggle can be mitigated. There are a number of different types of business protection which offer coverage for individual circumstances and situations including:
- Key Person Protection – Covers the loss of a key individual within the company with payouts used to help maintain profits or recruit replacement staff.
- Executive Income Protection – Offers a monthly payout in the event an executive-level employee is temporarily unable to work as a result of critical illness or injury, making this policy very similar to a standard income protection arrangement.
- Share Protection – Enables owners of a company to purchase the shares once held by a partner or standard shareholder.
- Business Loan Protection – Helps a business owners repay any outstanding loans or debts secured by another key employee or guarantor who has since passed.
- Relevant Life Insurance – Provides a life insurance-type payout for a business following the death-in-service of a key employee.
Why Might Arranging a Business Protection Policy be Challenging?
Whilst significant effort goes into arranging a business protection policy that can make the process difficult, the same can be said when arranging personal protection. There are however a few market constraints which have made the landscape of business insurance somewhat more challenging for advisers, but with the right attitude and approach you can still get your customers set up with the optimal policy for them and their company’s financial protection. Just some of the major contributors to what makes the protection market harder to navigate for advisers include:
- Rising premium rates – this might be the most significant deterrent for business owners considering a protection policy. With CPI currently higher than it has been in 40 years, insurers across the UK have been forced to respond with increased premium rates in order to cover costs.
- Cost of living crisis – the general public as a whole is cutting back costs wherever they can in order to deal with the cost of living crisis, and that applies to business owners too. Some owners view business protection as a luxury or an expense that can’t be justified, at least for now, and so opt against arranging a policy.
- Complex language and jargon – it has been stated that a key problem around business protection is the difficulty potential policy holders have in understanding the language and jargon within the subject area. A lack of standardisation across terminology and even policy names has meant client research is often complicated, and misunderstood.
- Lack of brokers selling Business Protection – the final contributor may very well be something that you (the adviser reading this) are a part of. Quite simply, there aren’t enough advisers willing to sell business protection, or they choose to refer their cases to another adviser with the relevant expertise. The lack of choice has made some members of the UK public somewhat wary and trends have suggested this has led to business owners questioning if coverage is worth it.
What Can Advisers Do To Drive More Interest In Business Protection?
Many business owners are short-sighted. Not as a personal failing, but because owning and maintaining a profitable company is an incredibly daunting task where decisions tend to get isolated in the view of ‘how will this make us more profitable?’
Obviously, business protection policies go against this concept and instead serve the purpose of helping owners maintain operations when a sudden loss of a partner or key employee occurs. The key to driving more interest in business protection therefore lies in an adviser’s ability to get business owners to see just how severely their operations can be impacted if a partner or executive is no longer able to work. Adviser conversations with these business owners can follow a very standard ‘do the short-term costs outweigh the long-term gains?’ model, which any commercial professional will be already familiar with.
Another straightforward way to drive more business protection discussions is to simply make your customers aware that you offer these types of policies.
As stated previously, the lack of advisers offering business protection coverage is a huge contributor to why the market is in such a challenging position. If you are aware that one of your existing customers owns a business, either through your fact find for another policy you may have arranged for them, or just through simple conversation with them, then make sure they know what sort of protection services you offer outside the standard personal protection arrangements.
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At PRIMIS Mortgage Network we strive to make sure our community of UK mortgage brokers and protection advisers have complete flexibility when it comes to how they arrange policies for their customers. This is why we have worked hard to broaden our list of partners to include all forms of lenders, from big high-street brands to small niche ones. Browse our comprehensive network of lenders here for information on which brands you have available to you when arranging a policy for family income benefit, critical illness cover, income protection and more.
For the complete list of brands offering business protection please see the following:
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