Micro management: Small-firm AE opens doors for group risk


With 1.8 million employers set to establish a benefits offering in the next two years, relationships are key for building new group risk business, finds Edmund Tirbutt

Now that pension auto-enrolment has begun to focus on employers with fewer than 30 employees, views on whether group risk can be a profitable cross-sell have become noticeably more polarised among providers. With the margins now so small, those who have invested heavily in new technology are inevitably the most positive about the opportunity.

Ellipse already has the ability to take AE data from intermediary and provider platforms and automatically generate quotes for group life, income protection and critical illness cover – which are followed up by an adviser offering further assistance. Although this process is live with only one adviser, the insurer is working on extending it to other distributors with the right platforms.

Ellipse CEO John Ritchie says: “We are pretty sure that many employers that haven’t had pensions before have no idea of the cost of these other products, and they often overestimate it.”

Canada Life Group Insurance launched its Simply Class group life assurance product in June 2015 to provide instant quotes to auto-enrolling businesses with up to 50 employees. It reports a closure rate from enquiries through this channel of over 10 per cent.

The provider is launching a range of marketing materials for advisers interested in growing business on the back of AE. Last November it offered a hard-copy pack that can be branded with an adviser’s name and in January it extended this with an ‘adviser to employee’ AE video that can also be co-branded and forwarded to those who provide their business cards. It is now looking at enabling advisers to focus on selling rather than administration by offering e-links to remove the quotation burden, and it is even considering giving employers self-service at procurement and renewal.

Canada Life Group Insurance marketing director Paul Avis says: “We take our responsibilities very seriously and it is incumbent on us to grow the market as well as take market share from others. I would be fascinated to know how other providers intend to grow the market without auto-enrolment when so many previous attempts at growth have failed during the past 10 years.”

Some providers are clearly not over-excited by the current opp­ortunity. Zurich Corporate Risk readily admits that it does not focus on companies with under 30 employees and Legal & General, which is known to favour the larger end of the market, claims interest but is not particularly active. Although it has launched both an online Quote and Buy portal, which can produce group life and income protection quotes within 15 minutes, and a group life master trust, it acknowledges that neither has been the subject of a huge marketing campaign.

Unum, on the other hand, reports that AE is “definitely a high priority” and that it is “starting to see significant new business flows”. It has soft-launched a simplified version of group CI cover suitable for the AE space and expects to launch a simplified group income protection product in the second quarter of this year.

Unum head of proposition development Andrew Potterton says: “There is an opportunity, and who wouldn’t be interested in a share of a massive population? It’s just a question of knowing where to position it, and I don’t think anyone is quite there yet. But we are starting to convert new enquiries into good business.”

Aviva, however, refers to “a lot more quotes with a modest amount of conversion” and reports that around a third of the businesses it has dealt with on pensions are open to conversations about group risk – mainly group life. The remaining two-thirds are just asking it to “keep it simple, keep me legal and take the pain away”.

Aviva managing director of group protection Steve Bridger says: “The secret is engaging the one-third, but just because they are open to discussion it doesn’t mean they will act. There is not much you can do about the two-thirds at present but you could win them over in time and it is important to create ongoing engagement as people routinely review their pension pots.

“So it’s not really a once-in-a-lifetime opportunity because, although auto-enrolment creates the opening of a window, that window stays open for longer than with pensions. The two-thirds opportunity could last many years and even the one-third opportunity could last months, and probably beyond that.”

Swiss Re technical manager Ron Wheatcroft agrees that the growth potential from AE may be realised beyond 2016/17 but expects Group Watch 2016 – due out this April with figures for 2015 – to reveal another big leap in excepted group life schemes, which doubled between 2011 and 2014. The reduction in the lifetime allowance to £1m in April is considered the primary driver.

Interestingly, Wheatcroft also wonders whether AE may boost demand for key person cover and other forms of business protection as a result of creating relationships between businesses and advisers. There is a case for arguing that SMEs could regard it as a higher priority than group risk because it can safeguard their very existence. He points out: “If a small business goes bust, there’s not much point in having a group life scheme.”

Focus for intermediaries
Intermediaries most attracted to the micro-business AE opportunity tend to be those with multiple arms because, even if attempts at cross-selling group risk products do not make an immediate profit, the gain can come later if the business grows with them.

Businesses are far less likely to switch to competitors if their adviser offers the full suite of employee benefits.

It may have taken a while but such advisers are now showing an awareness of the exact types of product that micro-businesses are looking for.

Jelf Employee Benefits head of benefits strategy Steve Herbert says: “Small employers want to do as little admin work as possible and they don’t just want low-cost products, they also want controlled costs. So you’ve got to have the mechanics in place to ensure costs don’t go through the roof. You also need to make sure employees know the value they are getting, so it is essential to have a good communications programme, maybe involving an engaging website that employees need to visit.”

But regardless of the products, there is also a growing realisation among brokers that the key to tapping into AE opportunities is to receive referrals from accountants.

Chase de Vere proposition development manager, auto-enrolment Sean McSweeney says: “The group risk industry has traditionally found it very hard to deal with micro-businesses because of lack of scale.

“We have propositions like Canada Life’s Class system but we need to make people aware of them, and the average small businessman just doesn’t have time to pay much attention to unsolicited approaches. AE has shown that, when they are forced to do something, they tend to turn to their accountant, whom they trust.

“The approach I’m taking for group life is the tax angle because, as soon as you start talking tax, accountants are interested. Typically, the ones I speak to weren’t even aware that tax-advantaged life cover still existed. Then group income protection and critical illness cover can follow as part of another conversation.”

Advisers commonly state that they are making it a high priority to cultivate new relationships with accountants and enhance existing ones. But one cannot help feeling that the group risk industry has missed a trick by not having eng­ineered networking functions on an industry-wide scale at which advisers and accountants could meet. Maybe it is not too late for Grid to work out something with the accountancy profession.

Threat could turn into opportunity

While some intermediaries who deal in both pensions and group risk business may enthuse about cross-selling opportunities, others who deal only with group risk and healthcare may regard auto-enrolment as a threat because of the risk of losing clients to intermediaries that acquire their pension business.

This was a concern for Premier Choice Group, which does not sell pensions. As a business retention tool, since late February 2016 it has referred businesses enquiring about pensions to AE in a Box.

Premier Choice Group head of employee benefits Steve Ellis says: “We are not authorised to give pensions advice but AE in a Box operates a very compliant system, so we refer people to its website for a very modest ongoing fee. By the end of the first week we had already referred five firms to it, which provided positive feedback. We also referred a firm of chartered accountants, which is finding it perfect for its clients.

“We are confident that the accountancy firm will give us group risk and other health-related business in return, so although the referral process started as a defensive strategy it could result in us growing our group risk book. We are also trying to enhance other relationships with accountants to get group risk business.”