Business overheads insurance – where’s the love?

Business overheads insurance is suffering a chronic lack of support from financial advisers, according to this year’s winner of the category in the Money Management/Dexx&r Adviser Choice Risk Awards.

David Mounsey, head of adviser services at AIG, which won the Business Overheads category for a second successive year, said there is a “true neglect of the product across the industry. It should be used significantly more by advisers on its merits.”

Mounsey attributed the lack of adviser support to a “combination of a lack of education in understanding where the product fits particularly, and how it works in conjunction with an income protection contract”.

However, he said he was “not pointing a finger entirely at the life companies because I think the advisers could do a lot more with regard to education in that space”.

“It’s the adviser’s job to make clients aware of the different types of risk insurances available, but business expenses as a product seems to get overlooked.”

He acknowledged that the products are “more difficult to explain (than other risk products), is a more costly product, and perhaps it also becomes a more difficult part of the sales process”.

“Probably the adviser has in mind that the cost to benefit ratio is not equitable, and clients would be paying too much for the cover they are likely to get over the short-term.”

As a result, it is often left to last in the sales process, at which stage affordability becomes an issue, with the client’s other priorities then coming into play, such as life cover, total and permanent disablement, and income protection.

Driving adviser interest in the product would require the insurers to “upgrade education of the sales opportunities that exist for advisers”, Mounsey said.

“It would also probably require the insurers to reconsider their pricing of the product and to reconsider the way it’s marketed and the period over which it’s marketed.”

David Wright, head of product at Asteron, which took out the category’s bronze award, agreed with Mounsey that life offices could “certainly be doing more in terms of explaining to advisers how business expenses operate”.

“I think sometimes that it may not be completely understood by advisers, while a lot of advisers think it is too hard to sell, especially as you have to prove expenses at claim time,” he said.