Eyes on the small co prize

Tens of thousands of white-collar small firms are set to reach their staging date – many of which should want group risk products, says Canada Life Group Insurance marketing director Paul Avis

A tidal wave of opportunity is about to hit the group risk market. That is what I see when I look at the AE staging dates, as we enter the period where sub-50 employee companies reach AE pensions implementation this month.

A massive and prolonged wave of opportunity is opening up for new-to-benefits discussions, with 1.2 million potential customers talking benefits for the first time.

Compare that to the current 41,323 registered group life assurance schemes and you can see the difference – we are currently woefully under-penetrated, with fewer than 3 per cent of all UK employers represented. While many of these employers will be focused on AE pension implementation and compliance, so possibly doing the minimum, there will be a proportion that are open to other benefits discussions and would be happy to get this all done at once, easily and affordably.

So who is coming into the benefits world? We will have more than 70,000 restaurants, over 48,000 computer companies, more than 45,000 management consultants and 34,000 architectural and engineering firms. The latter three areas could be termed the white-collar professional segments.

Interestingly, there will also be over 5,000 TV and film makers, more than 150 logging companies, 670 meat processors, 370 dairy manufacturers and 1,383 watchmakers – which shows that smaller segments in specific areas are still worth pursuing, especially if affinity relationships exist.

So, we asked ourselves, what would appeal to an SME decision maker at the end of a long pension AE discussion? We need to bear in mind that, prior to seeing an adviser, the employer may not be  aware of the new 1 to 3 per cent escalating contribution to their employee’s pension.

This news may come as an unwelcome shock, despite government advertising. Promotion of group income protection (GIP) is too complex a concept to get over quickly as part of the pension discussion. So we discounted GIP. We also excluded group critical illness (GCI) as the product complexity and P11D aspects would probably be too much for the client to take on at this stage. So what will work?

Group life was the resounding response from the advisers we surveyed in the summer of 2014. Group life was seen as the simplest, quickest and, some would say, benchmark benefit to get new employers on board.

So we began to probe what was needed to encourage SMEs to consider anything other than pure pension AE compliance.

Our 2014 employer research showed that there is still much work to do in getting the message across to the larger employer segments – businesses employing 150 to 2,000 staff – as 18 per cent admitted knowing little about group life assurance.

Many advisers are already reworking revenue and earnings models in the wake of recent pension changes. Group risk, private medical insurance, cash plans, financial education for workplace programmes, getting funds under management, high net worth personal financial planning and complex pension planning are all being considered. AE pension discussions are the new ‘land grab’ to get corporate clients on board.

So the opportunity to differentiate the adviser offering exists as, in our view, there is a clear opportunity to educate and inform by simply extending the AE pension discussion. Bearing in mind the volume of businesses, and the segments in which they operate, we believe that a simple, transactional fixed benefit group life scheme will work.

This wave of opportunity to grow the group life market is timely – let us be brave and set ourselves a target. Let’s try to grow it to 4 per cent of all employers through this initiative, though even that leaves a lot of opportunity untapped.

If we look positively at this time in the AE pension implementation cycle and agree a clear partnership and strategy for growth, with strong, segmented employer marketing, every corporate adviser will be in a position to take advantage of this unique opportunity to grow the group risk market.

Just as importantly, it will ensure that post 2018, when everyone in the workplace has the offer of a pension, there is still an ongoing relationship with the corporate client to continue to maximise this once-in-a-business-lifetime opportunity.