Business protection insurance is failing to make significant inroads into SMEs, leaving hundreds of thousands of firms exposed in the event that a key individual dies, data from the latest Term Watch report shows.
Combined sales of key person level term assurance (LTA) and LTA with critical illness fell by 1.9 per cent in 2019, down to just 21,060, following a 31.8 per cent fall in LTA+CI sales.
Standalone LTA sales rose 13.7 per cent, although this was insufficient to offset the overall decline in sales.
Total number of new business protection policies, 2016 – 2019
| Product | 2016 | 2017 | 2018 | 2019 | % Change 2018/19 |
| LTA | 14,897 | 15,158 | 14,083 | 16,015 | 13.7 |
| LTA+CI | 4,194 | 6,029 | 7,394 | 5,045 | -31.8 |
| Total | 19,091 | 21,187 | 21,477 | 21,060 | -1.9 |
The report showed more positive news for the individual protection market, with income protection policies growing by 20.9 per cent.
generally.2,182,610 new term, whole life, critical illness and income protection policies were purchased in 2019, an increase of 5 per cent year on year.
Overall term sales grew by 1.9 per cent. Term sales without critical illness (CI) increased by 4.0 per cent and term sales where the product included a CI benefit, fell by 2.8 per cent.
Guaranteed Acceptance whole life policies grew by 6.3 per cent and fully-underwritten whole life policies, from a much smaller base, by 29.2 per cent.
Swiss Re technical manager Ron Wheatcroft says: “While the figures show that in some parts of the industry 2019 was a bumper year, the figures around business protection were once again disappointing. The Government wants to encourage SME businesses in particular to support the health of their workforces – a very good thing – however too few businesses seem to have arrangements in place to protect the health of their own business were they to lose an individual key to its success.
“The British Insurance Brokers Association (BIBA) set up a signposting agreement in January 2020 to improve access to insurance for non-standard risks, and we believe a similar referral service for advisers skilled in such business risks could be one way of protecting more firms. Beyond that, there is clear need to drive awareness of the risks and how to manage them among a greater amount of financial advisers, wealth managers and wider businesses.
“Insuring the people at the top of the business is also important as whatever protection the employees may have in place, it is built on sand if the person on whom the business is founded dies and there ends up no business to pay the benefits.”
