Advisers are “intimidated” and “scared” when it comes to selling business protection, fellow advisers in the industry have said.
An apprehensive perception of the product, advisers argue, has played a part in driving a gap between the number of business protection policies taken out, and the number of small and medium-sized enterprises in the UK.
Between 2019 and 2020, policies taken out dipped 43.1 per cent to 11,975, according to the latest Swiss Re data.
This means on average just 0.2 per cent of the UK’s 5.82m SME population took out a policy last year, compared to 0.36 per cent the year before.
“It’s ridiculous how small it is. This country is dominated by companies under 49 employees, and yet they get ignored,” said Roy McLoughlin, associate director at Cavendish Ware Wealth Management.
Addressing the reasons why the gap exists, McLoughlin said: “Advisers can get intimidated by business owners. They’re intimidated by titles. I’ve seen it so many times. We need to make people more confident.”
He added: “There’s an inert snobbery in our industry too. Advisers tend to go after the big boys. They don’t know how to approach SMEs.”
Business protection products include key person insurance - where an individual invaluable to the business’ operation is insured - shareholder protection - where a business owner’s partner gets money not shares if they die - and loan insurance - where a business borrows money from a bank and the lender asks it to take out insurance on the loan.
McLoughlin highlighted the “huge gap between insurers and advisers” when it comes to these products. He cited the Protection Distributors Group, a trade body for insurers which he thinks could act as the link between insurers and advisers when it comes to educating the latter on how to do it.
“Firms also need to train people internally to do business protection,” he said.
An example of this is LifeSearch, a protection adviser which only got into the space in recent years but has since reaped the rewards.
“Having brave conversations and knowing what to ask is often the best way to discover all areas of possible exposure for the client,” Alex Strachan, a business, group and inheritance tax provider at LifeSearch, said.
“While many advisers focus on family protection, those who include business protection often see a bigger picture. And then once the client sees the bigger picture, it’s then a more simple case of structuring the recommendation correctly.”
In 2020, the average sums assured for level term key person and critical illness policies sat at £540,563 and £239,008, respectively, according to Swiss Re.
This is compared with £172,645 and £79,437 for personal life policies with and without critical illness.
The commission advisers can earn on business protection is therefore much higher. And yet, many still won’t go near it.
“Advisers are scared of learning it,” said Sam Marriott, director and co-founder of CSE Financial Services.