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AXA Business Protection

AXA Business Protection. Selling Business Protection. Selling Business Protection. Topics to cover…. Business Protection – The Need Selling Business Assurance Planning Preparation Execution. Business Protection – The Need. Why do people go into business?. Do it to make money

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AXA Business Protection

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  1. AXA Business Protection Selling Business Protection

  2. Selling Business Protection Topics to cover… • Business Protection – The Need • Selling Business Assurance • Planning • Preparation • Execution

  3. Business Protection – The Need Why do people go into business? • Do it to make money • Build their business as part of a dream • Expect to pass on the rewards to their family and heirs • Want to see the business survive and flourish • Enjoy the independence and take pride in its success • Want to be own boss and be in control If a key person becomes seriously ill or dies…

  4. Limited Company Partnership Sole Trader Key Person Protection Loan Protection Shareholder Protection Partnership Protection Executive Income Protection Business Protection – The Need What businesses purchase what protection?

  5. 4.7 million businesses in the UK, which equates to approx: 1,200,000 plc 507,000 partnerships 3,000,000 sole traders Source: BERR Press Release 2008 Why sell Business Protection? The market… Business Protection is a largely untapped market. At the start of 2007 there was an estimated… With most SMEs having little or no Business Protection cover, the scope and market potential is substantial

  6. The average Life Cover sum assured applied for in 2008 was over £474,000 for Business Protection. Over 3 times more than for Personal Protection Source: AXA Applications 2008 60% of businesses do not have business protection Source: Swiss Re Insurance Report 2005 Its estimated that only 5 – 10% of companies have Key Person cover Source: Swiss Re Insurance Report 2005 Why sell Business Protection? The market… In 2005, Swiss Re’s Insurance report discovered:

  7. It is also worth noting that Business Protection discussions can lead to further opportunities There is a £500 billion Business Protection Gap Source: Swiss Re Insurance Report 2007 Why sell Business Protection? The opportunity… A subsequent report in 2007 found:

  8. There have been over 200,000 business closures in the first half of 2008 Source: Barclays Newsroom, 2008 half year start ups and closure report Individuals have a greater than 1 in 8 chance of death before age 65 Source: www.gad.gov.uk, 2004-2008 interim life tables 5.8 million working days were lost due to sickness or injury between June 2007 and July 2008 Source: National Statistics Feature – Sickness absence from work in the UK, 2008 Individuals have a 40% chance of serious illness before age 60 Source: www.statistics.gov.uk, 2001 census Business Protection – The Need Your clients can protect against…

  9. “ Fail to prepare, prepare to fail ” Selling Business Protection Preparation Prepare by: • Knowing the technical- we can help • Learning the structure /script • Visualise positive outcomes

  10. Selling Business Protection Typical Sales Process

  11. Selling Business Protection Identify clients... • Sole practitioners • Partnerships • Small Limited Companies • Quoted Companies • Managing Director • Finance Director • Partnership Senior partner • Partnership Secretary The world loves a specialist

  12. Selling Business Protection Find a way in… • Flyers and sales aids • Presentations to the business community • Existing clients • Referrals • Professionals that already work for you • Breakfast meetings etc

  13. Selling Business Protection Prepare for the first meeting… Be here

  14. Selling Business Protection The first meeting… The objective: • To raise awareness of this aspect of managing business risk • Complete a preliminary corporate fact find • Seek permission to conduct a full review of the risks • Agree who should be involved ( decision makers) • Seek initial views on business value/key person value and why there is a risk. Design and use questionnaire covering this .( note: not all people you speak to will be privy to information you might hold) • Ask for justification of values etc

  15. Selling Business Protection Following meetings… • Deeper analysis • Memorandum/articles –do they restrict share deals • Ask about loans and ability to repay • Seek views on what happens if share holder dies • Seek to understand consequences of key person death • More individual fact finds? • Don't forget other business opportunities • Aim to really understand what the client wants • Keep in mind the requirements of the provider

  16. Selling Business Protection Work out a solution… • Routes to a satisfactory conclusion: • LOA on Key Person • Shareholder Protection in Trust for other Shareholders • Partners in trust for other Partners or Accrual agreement and own life for beneficiaries. Capital accounts still need to be dealt with. • Combine Key Person and Shareholder Protection in one policy in trust for other Shareholders • LOA on Shareholders to “buy-back” shares • Understanding the Underwriting approach ( varies with each provider)

  17. Selling Business Protection Work out a solution cont’… • Taxation matters; • Key person, the insurance is to protect revenue – which in turn provides profit • Loan protection – no tax relief • Share protection- no tax relief • Premiums generally paid by the business and treated as earned income therefore subject to income tax • Claims treated on their merits (despite how premiums havebeen treated) but generally only true key person insurance is taxed as a business receipt This information has been based on our understand of current tax legislation, which is subject to change and individual circumstances

  18. Selling Business Protection IHT Business Property Relief • Generally available 100% • Quoted companies 50% (if controlling interest) • Lost if asset is subject to a sale agreement • Only available on assets used in running the business

  19. Selling Business Protection Putting pen to paper… • Prepare a report: • The situation • The risks • The solutions • The costs • The detail • Next steps

  20. Selling Business Protection In the Boardroom • Present to the Board (ensure minutes taken) • If other professionals are in attendance address their issues and seek their agreement in front of the group • Seek Board approval • Move to the paperwork

  21. Selling Business Protection Submit the paperwork • Check requirements • Understand the usual underwriting approach • 3 years profit figures/accounts • No Financial Questionnaires required under £1 million for Life Cover and £500,000 for Critical Illness Cover • Medical questionnaires ( Tele-underwriting?) • Discuss case with Underwriting Team before submission • Be ready to justify sums assured

  22. Selling Business Protection Case study – TAT Limited What would TAT Limited be interested in? Share protection for directors Key person protection Key person protection for shareholders as all three are key to the company’s continuing success Possible business loan protection for bank overdraft Business loan protection for directors’ loan accounts Executive Income Protection ILLUSTRATION ONLY

  23. ILLUSTRATION ONLY

  24. ILLUSTRATION ONLY Re valued ? How secure? How old? Healthy cash position Why, to support trade debtors? Not much owed

  25. ILLUSTRATION ONLY More detail required

  26. Selling Business Protection TAT Limited - advice • Key person is linked to central government and wins substantial LEA contracts. 50% of gross profit of £2million directly related to her sales. She earns £500k • Directors value the business at 3 times gross profit and are all fully engaged in the business. Each would want £2 million ( inclusive of loan account) as a “walk away” value • Each want wealth advice at a personal level • The business wants advice on pension arrangements ILLUSTRATION ONLY

  27. Selling Business Protection TAT Limited - solutions • Key person insurance • 5 year renewable term Life Cover - £3 million • Share protection • 20 year term £2 million in trust for each of the other directors • Executive income protection on all directors • Other areas result in IHT planning and pension sales ILLUSTRATION ONLY

  28. Selling Business Protection In summary • Business Assurance sales require strategy and planning • Knowing your customer means understanding their wishes before you look at the technical • Building solutions requires the technical bits • Presenting solutions is best done on paper and at Board meetings • Selecting the provider is more about the support offered rather than the raw cost • Fees and Commission fit well in this market

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