Business protection may not be a household name but when the All England Lawn Tennis Club protected its Covid-stricken championships with £1.5m of pandemic insurance in 2020, its benefits became clear.
The club behind the famous tennis tournament, also known as Wimbledon, is said to have received a £170m insurance payout after it had cancelled the year's event due to the pandemic.
This meant it could continue to pay its staff and keep operations going in preparation for the following year's event, the shape of which was by no means certain.
If the pandemic has taught us anything, says Roy McLoughlin, associate director at Cavendish Ware, then it is that neither we nor our business are indestructible.
Yet business protection sales, made up of a suite of products including business interruption insurance, key person cover, and other succession planning policies, are underwhelming.
According to Swiss Re's Term & Health Watch report of 2021, a mere 12,000 business protection policies were sold in 2020 – 43 per cent less than in the previous year when it was 21,060. This year had already marked a two-year decline in policy sales.
Yet, the opportunity is "massive" to serve smaller businesses, the report stated. According to Office for National Statistics data, there were 1.4mn businesses in the UK in 2021, and just 8,000 employed 250 people or more.
McLoughlin talks to FTAdviser In Focus about the struggles and opportunities for advisers in selling business protection.
FTA: To what extent is there a business protection gap and what are the consequences for UK businesses?
RM: The gap is vast. There are abut 2.5mn businesses in the UK and that is an expanding group. But there are just over 20,000 advisers and even if they were all doing protection it wouldn’t divide by 2.5mn very well. So what you’ve got is a service issue more than anything else.
As a consequence, the number of policies written is woefully short. This is a particular problem for smaller businesses, which make up the vast majority of businesses in the UK. A lot of the larger ones may have relationships with employee benefits companies.
The big problem, like with individual insurance, is the perception that ‘it won’t happen to me’, whereas we know that statistically, unfortunately, there is much more of a chance that things will happen to people and where businesses are smaller, paradoxically, they are more reliant on protection because there are fewer people to do that person’s job or to replace that business.
FTA: You have previously said advisers are “intimidated” and “scared” when it comes to selling business protection. Can you elaborate?
RM: Scared is probably a little bit over the top, but you’re dealing with owners of businesses some people feel are of a certain ilk, where they might be a bit more nervous about talking to them – the managing director, the finance director, the HR director.
There is an element, and we see it all the time, of advisers shunning away saying, ‘I don’t feel comfortable with that sort of person’ and we need to have the faith and confidence that it doesn’t matter if you’re talking to the guy in the post room or the woman that’s the CEO, you should have the same levels of confidence.