Fintech company Pensionsync plans to broker group life insurance to small and medium sized businesses, staking its business model on the belief there is untapped demand for protection in the small and medium-sized enterprise world.
The new strategy, which bears little resemblance to a traditional, advice-based insurance brokerage, will see Pensionsync harness employee data obtained through its core business as a back office technology provider, to provide employers with bespoke group protection quotes.
The new service would provide life insurance, income protection and critical illness quotes, and would target the hundreds of thousands of UK businesses that have no group cover.
Pensionsync chief executive Will Lovegrove told FTAdviser that "automatically tailored" quotes, backed up with robo-advice for employers, would make "protection affordable for everyone".
He said the firm was working with "a small group of insurance providers", in preparation for a summer launch of the new insurance brokerage website, called benefits.market.
In the lead up to the launch, Mr Lovegrove said the firm had made its core product, which transfers member data between paryroll and workplace pension schemes, entirely free to all users.
While this meant the firm would have no sure revenue stream, Mr Lovegrove said it would increase Pensionsync's access to the SME market, allowing it to offer the tailored brokerage service to as many SMEs as possible.
Once it has signed up employers - normally via agents such as accountants and bookkeepers - Mr Lovegrove said the firm would then approach businesses with the offer of tailored group protection quotes.
These would be tailored to the precise needs of the company's employees by using the large amounts of personal data obtained through its core auto-enrolment business. That includes all the information an auto-enrolment provider needs about its members.
However, Mr Lovegrove stressed that employee data would only be mined for this purpose with the express consent of the employer.
He told FTAdviser that, once the new strategy was up and running, the majority of revenue would come entirely from commissions paid for by providers, meaning Pensionsync would not charge employers or their agents for the service.
To make the service even more attractive, Mr Lovegrove said Pensionsync would share a small portion of the commissions with the agent of the employer - whether the accountant, book-keeper or payroll company. He said his "initial thinking" was that this portion would be around 10 per cent of total commissions.
"This is about opening up the SME market to life insurance," he told FTAdviser.
"The SME market has tradionally been very difficult to access for group risk providers. That's why not many providers are getting to SMEs."
Citing the "Easyjet effect", Mr Lovegrove said pensionsync's brokerage would be able to reduce costs because "we will not have to work as hard a human employee".
In addition to the "automatically tailored quotes and product comparison tables", Mr Lovegrove said employers using the service would be decision making with “robo-advice”.
He said these innovations make "protection affordable for everyone".
Allan Maxwell, director Glasgow-based advisory firm Corporate Benefits Consulting, said while "on the face of it" Pensionsync's plan seemed like "a good idea", he was sceptical there would be enough appetite among small employers.
"My experience with SMEs is that every pound is a prisoner," he said. "So even though group life insurance is very cheap, I'm not sure whether there would be the demand."
He said commission rates tended to be around 4 per cent, meaning Pensionsync would have to broker a lot of group policies to make a profit.
He added that sizeable policies would need to be underwritten - a process that involves lengthy form-filling and, often, consultation with members' GPs - and that this may put off employers.
However, he said employers might be tempted by the fact that group policies "tend to go down pretty well with the workforce".
james.fernyhough@ft.com
