I have often heard it said that one of the big factors behind group risk’s lack of appeal among advisers is that it is not a financially remunerative area of corporate advice.
Every time I disagree! Commissions of up to 30 per cent of premium can be paid every year the contract is in force, so whichever employer segment is being advised on can provide good remuneration.
This is not just applicable to large organisations. Even SMEs can be advised using an online system to provide numerous cost options; the simplest we offer generates four quotes in a couple of minutes, with the whole job for the year – quoting and going on risk – wrapped up in around five minutes.
But for fee-based advisers, the potential to consult is massive due to ongoing and historical legislative change. If an adviser has a portfolio of group risk schemes being serviced on a fee, here are just some of the most topical areas with opportunity:
Group Life Assurance (GLA)
Registered group life schemes provide benefits within the lifetime allowance, whereas excepted schemes are outside this limitation.
For anyone with any kind of fixed or enhanced protection, or could otherwise be affected by the reduction from £1.25m to £1m in April 2016, they make good sense on the face of it.
But that is where the true consulting starts. Implementing an excepted scheme needs specific tax and legal advice, especially if it is replacing a registered scheme.
In 2015, the insurance industry saw 31 per cent growth in excepted scheme benefits and 20 per cent in premiums, so it is clear from the client demand that a review is needed.
As interest rates remain low, potentially getting even lower, existing death-in-service spouse’s pensions need attention.
In addition to interest rates, annuitant life expectancy is increasing and there are a number of closed (read: ageing) schemes; this benefit will cost more going forwards.
Employers will need to justify the continuation of the benefit or consider alternatives such as additional lump sum amounts.
Alternatively, fewer than 3,000 employers now have these schemes, covering under 400,000 employees (down by 99,473 in 2015), and so there is an opportunity for those employers to celebrate and communicate what an exclusive benefit is in place, with terrific value to an employee’s survivors.
Automatic enrolment provides an ideal springboard to talk about new to market GLA. Some 1.3m employers are eligible to buy this product but there are only 42,848 registered schemes.
This implies that only 3 per cent of employers have this benefit or, to put another angle on it, 97 per cent do not!
If everyone has access to a pension thanks to auto-enrolment, how will employers retain and recruit the best people in the war for talent? Is GLA the inexpensive, simple way for an employer to differentiate versus their industry competitors?
There is also an opportunity stemming from the fact that many schemes require updating, for example, in light of the reduction of the Lifetime Allowance to £1m in April 2016.