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Small to Medium Enterprises

An understanding of the attitudes, behaviours and expectations of SMEs who have purchased life insurance through an adviser

Small to Medium Enterprises

An understanding of the attitudes, behaviours and expectations of SMEs who have purchased life insurance through an adviser

With so much change affecting the industry, it is an opportune time for advisers to make contact with their clients to review or explain their cover and advise if, or how, changes will impact them.
Talking points
With the spotlight on the practices of advisers, both inside and outside of large institutions, a pleasing consequence has been a growing understanding of products, particularly among SMEs

Compared to the 2018 research, SMEs with life insurance say they are better informed about their cover and more confident talking about it. This is likely because they are financially liable and closer to their business, making it necessary for them to pay close attention.

The price of advice
When taking out their most recent insurance, 62% of SMEs first worked out what cover they needed, then looked at what they needed to pay for it.

And when given a price range between $1,500 and $5,000 for an adviser to produce a comprehensive life insurance plan, like consumers, SMEs were more likely to commit to the lower end of the range. On average they were willing to pay $1,700.

What SMEs look at when taking out insurance cover

  • Total SMEs
  • Male
  • Female
  • 18–34
  • 35–49
  • 50+

First worked out what cover they needed.
Then looked at how much they would need to pay.

Total SMEs
62%
Male
68%
Female
51%
18–34
44%
35–49
62%
50+
76%

First worked out what they could afford.
Then looked at how much cover this would pay for.

Total SMEs
38%
Male
32%
Female
49%
18–34
56%
35–49
38%
50+
24%
Perceptions of value
Advisers have an opportunity to demonstrate the value of their service to SME clients by spending more time with them upfront to ensure they fully understand the benefits and the quality of their insurance recommendation.

51% felt that buying life insurance through an adviser was more expensive than through a super fund and 43% think buying insurance through an adviser is more expensive than buying it directly themselves, while two in five SMEs perceive the quality of the insurance to be higher from an adviser.

Many SMEs pride themselves on being able to spot value and this trend manifests itself in their perceptions of financial advice.

This suggests advisers can do more to show their value and their holistic approach to insurance. Advisers should take the time not only to explain the products but to ensure clients understand the benefits that come with having a tailored policy and bespoke advice around insurance concerns.

There is more advisers can do to educate SME clients about the reasons for their recommendations in order to convince SMEs that tailored guidance on their insurance needs for their business is an investment that pays off. 

Fees and commissions
SMEs also showed a preference for fees over commissions when it comes to paying for their insurance advice, but they were also more open to advisers taking commissions.

Like consumers, nearly 8 in 10 SMEs say they would be willing to pay an upfront fee if it meant lower premiums over the life of their policy. Yet more than a third of SMEs couldn’t recall what the commission their adviser took on their life insurance was. 

One third (31%) of SMEs say they would feel no different towards an adviser knowing that they took a commission and 27% say knowing their adviser took a commission would actually make them trust their adviser more, compared with just 10% of consumers.

Interestingly if insurance commissions were removed, nearly 4 in 10 (38%) SMEs say this would make them more likely to see an adviser, compared to just 19% of consumers. 6 in 10 perceive that more Australians will be underinsured if removal of commissions occur.

It is perhaps not the fees or the commissions that are important to clients, but the explanation that accompanies them and whether the adviser is transparent about them.

If insurance commissions were removed, most SMEs don't expect this will have a significant impact on their willingness to see an adviser.

Knowing that an adviser receives a commission, rather than being paid an upfront fee impacts trust of the adviser in the following ways.
Less likely to trust the adviser
Less likely to trust the adviser

            

Feel the same towards the adviser
Feel no different towards the adviser

            

More likely to trust the adviser
More likely to trust the adviser

             

Don't know how it impacts their trust of the adviser
Don't know how it impacts their trust of the adviser

           

Half of SMEs are considering leaving their adviser in the next 12 months, either to change to another adviser, or to cease the relationship completely.
Moving on
The main reasons cited are cost and trust issues, although a significant percentage (23%) of SMEs cite affiliation with a major bank as the reason for leaving.

This may reflect the often-fraught relationship small businesses can have with major banks and the need to show that you are operating in the best interests of SME clients. 

At the very least, this should prompt advisers to contact their clients and have a frank conversation about their clients’ insurance needs.

Fewer than two-thirds of SMEs (63%) had a review with their adviser in the last 12 months. The benefits of a review are not just for the adviser, it helps SMEs better understand their changing needs and evolve their cover to ensure they remain protected.

Of those SMEs that undertook a review in the past 12 months, 55% changed their cover, with about half (49%) increasing their cover. 

If looking for a new financial adviser, half of SMEs with life insurance would prefer to use an independent adviser, followed by one aligned to a larger network of other financial advisers.

This highlights the ongoing need for financial advisers, whatever their affiliation, to prove their worth and demonstrate their value.

SME intention in regards to using their current adviser
Why SMEs are changing or no longer using their adviser
High fees or commissions for advisers
1. High fees/commissions

      

Trust issues with adviser
2. Trust issues with adviser

       

Adviser with large bank
3. Adviser attached to large bank

         

Value for money with adviser
4. Poor value for money

      

Can't afford an adviser
5. Can't afford it

    

Received poor advice from adviser
6. Received poor advice

          

Reasons for recommending their adviser
Advisers explaining things in detail
"He is good at explaining things in detail and lets us see different options or outcomes before we decide."

SME with life insurance, 50-54, Brisbane

Insightful and proactive adviser
"He is helpful and insightful on top of being very proactive to my needs."

SME with life insurance, 30-34, Melbourne

How advisers talk to the customer
"I like the way they talk to their customer."

SME with life insurance, 30-34, Melbourne

Good processes gave me more time
"Process was well managed and easily implemented leaving me more time for my business."

SME with life insurance, 60-64, Brisbane

Good trustworthy adviser
"(My adviser) is a good trustworthy adviser (and) has your back when you need him."

SME with life insurance, 55-59, NSW

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