Arranging a competitive suite of employee benefits can help your clients attract and retain talent. But, as they risk losing everything if a key person dies or is forced to step away due to illness, perhaps advisers also need to start talking to clients about business protection.
“A business can have the best employee benefits in the market but it’s no good if it doesn’t have the means to pay for it because the owner died,” says Stuart Halliwell, founder of Stuart Halliwell Consulting. “It’s an underserved market and a great opportunity for advisers.”
Market statistics support this. Although there are around 5.5m businesses in the UK, most of which have fewer than 250 employees, figures from Swiss Re’s Term Health Watch show that only 14,142 new business protection policies were placed in 2024.
While this is up slightly on 2023, when 14,003 policies were sold, it’s hardly shifted in the past four years. This lack of growth concerns Zanele Sibanda, head of business development at Towergate Employee Benefits. “Underinsurance in this space is in the trillions of pounds. So many businesses need cover: it’s the cornerstone of business continuity,” she says.
SME exposure
This need is greatest among SMEs. “These businesses are particularly vulnerable to a financial loss that will impact their operations if a key individual dies or is unable to work because they become ill or disabled,” says Peter Hamilton, head of market engagement at Zurich.
Without financial protection, the fallout of any of these events can be catastrophic. Legal & General’s State of the Nation report found that 59 per cent of businesses did not expect to last 12 months if they lost a key person.
Even where a partner or shareholder wasn’t the kingpin, their death could derail the business, with their stake potentially passing to their family.
Business protection offers simple solutions to these headaches through a range of products. Key person insurance provides a payout to cover unexpected expenses such as lost profits or hiring a replacement; business loan protection can cover any outstanding loans held by the deceased; while share or partnership protection enables surviving shareholders to buy out the deceased’s stake.
Protection gap
While the need is great, there are several barriers preventing take-up. For starters, many business owners simply don’t know it’s available. “Many will have some form of contingency planning in place for fire, flood or liability,” says Gregor Sked, senior protection technical manager at Royal London. “But most will overlook the key asset – the people – that keep the business running. Advisers need to talk to clients about the risks and solutions.”
But this conversation rarely takes place. The nature of business protection means it falls between two stalls. “It doesn’t fit neatly with personal advice but, equally, it doesn’t match the role of corporate advisers, who tend to focus on larger organisations,” says Vikki Jefferies, market development director at L&G’s retail business.
Where corporate advisers do recognise the potential, many are put off by perceived complexity. “Advisers need to remember it’s just term assurance, critical illness and perhaps even income protection. All will be medically underwritten the same,” adds Jefferies. “The hardest part is having the conversation.”
Reasons to talk
As well as being good for business, potentially generating a new stream of revenue while protecting existing ones, Sibanda says advisers should talk to clients about business protection from a duty of care perspective. “It’s your responsibility to highlight the risks your clients face and point to potential solutions,” she says.
“If you noticed the wiring was faulty in their building, you’d point it out.”
She believes business protection should be as high a priority as compulsory insurances such as employers’ liability and motor. “There will be a point where the regulator says an adviser failed in their duty of care as they didn’t talk to a client about business protection,” she adds. “Without cover, the business and everyone’s jobs are at risk.”
It also makes sense to raise the topic with clients. Hamilton says that business owners appreciate being able to talk to one adviser who can solve all their problems, whether that’s arranging the pension or protecting the business. “Right now, there are still too few people talking to SMEs about their business protection needs,” he adds.
Conversation starters
Existing clients – and insurers – are good starting points. Sked recommends running a segmentation exercise on an existing client bank. “Look at your contacts’ jobs,” he says. “If they’re an owner, shareholder or director, it’s worth raising the topic.”
Insurer contacts can also support these first steps. Several, including Aviva, L&G and Zurich, straddle both group risk and business protection. “There are some specialist aspects that will be dealt with in different teams but there shouldn’t be any material barriers when it comes to dealing with insurers,” says Hamilton. “For example, we only require one terms of business.”
Insurers can also provide plenty of training or this can be sourced independently through training academies. “Over 20 hours I can take an adviser from zero business protection experience to confident or from competent to great. A lack of knowledge shouldn’t be a barrier,” says Halliwell.
The launch of Business Protection Focus earlier this year, which is supported by insurers, advisers and reinsurers, is also helping to raise awareness. This ran its first BP Focus Week in June and, after 650 people attended, is planning to make it a twice-yearly event. “It’s great,” says Roy McLoughlin, consultant at Omny Benefits. “It got people talking about business protection, which will help to drive take-up.”
Mind your language
Even with so much support, starting the conversation can feel unnatural. Halliwell recommends talking to clients about their business situation and long-term aspirations. “Together you can identify the risks they face and the potential solutions,” he says. “They won’t always need insurance: it might be that they need to focus on other forms of business continuity planning such as a succession plan.”
He also suggests revisiting this conversation every year. “An SME can change massively in a year and new risks will emerge,” he adds. “Having this conversation will make sure they’re covered.”
Scenario building helps too. “Build the picture and talk to your clients about what would happen to their business in similar situations,” says Sibanda. “The insurers can help with claims examples or look on the news websites.”
While discussions about divvying up the business on death can feel a little final, there are also sweeteners to make the conversation a little easier. “Business protection plans often come with a range of additional services, such as recruitment, HR and legal support, that are invaluable to SMEs,” says Sked. “The product delivers value even if they don’t need to claim.”
Build connections
It’s good to have a full contact book too. McLoughlin recommends engaging with lawyers and accountants: “Business owners look to these professionals for advice on protecting their business. They can advise on the legal and tax side but they need a regulated adviser to put the right protection products in
place.”
Where time or confidence prevents full immersion into business protection, Hamilton suggests finding an adviser to partner with.
He says: “The increased use of partnering with or signposting to other advisory firms is one of the most positive developments in recent years. Being able to refer a client to a specialist works well for all parties.”
McLoughlin says this is often the first step into business protection. “We find a lot of advisers who signpost business suddenly have a eureka moment and decide to do it themselves,” he says. “There are massive opportunities and it’s an important area, for advisers and their SME clients.”