There are 1.1 million SMEs (small-medium enterprises) with 50 or fewer employees in the UK[i]. All of these organisations will be forced to think about their benefits packages over the next few years as a result of pension auto-enrolment, which commenced for this group of employers from 1^st June this year.

There are advantages in offering Group Life Assurance (GLA) as an employee benefit but perhaps most important is the need to stand out from the crowd and offer an attractive benefits package that aids the recruitment and the retention of staff. In an age where all employers must now automatically offer a workplace pension, the spotlight has to move onto other benefits and GLA has an important role to play.

As an insurer, our challenge is to ensure we communicate the importance of this message by providing an easy-to-understand and fit-for-purpose product. To make sure we do this effectively, we carried out two focus group sessions with owners and directors of SMEs who are involved in decisions over the employee benefits and financial products provided by their company.

SME employers recognise the need to attract and retain key staff

It was clear from our initial discussions with SME business owners that many view benefits as a luxury rather than a necessity. One commented, “Times are hard. You’ve got to think where all the money goes.”  However, employers recognised the need to attract and retain staff.

The focus groups were shown a range of advantages associated with our own Simply CLASS Group Life Assurance product, ranging from tax benefits and the simple application process to the provision of a bereavement helpline and premium rates guaranteed for three years. 

Life insurance can be particularly attractive in smaller organisations where employers are very close to their staff. This closeness can make the loss of an employee very hard to bear. Once the core concepts of the product were explained, the majority agreed there was an appetite for it, with auto-enrolment cited as a trigger. Packaging GLA alongside a pension product was seen as an attractive proposition for employers, though many admitted they would want help from insurers and advisers in demonstrating the value the product to their employees.

SME employers overestimated the cost of GLA

When predicting the cost of providing GLA cover, focus group participants had a tendency to overestimate how much they would have to pay, in some cases by as much as twice the actual cost.

We provided a simple quote for an example small scheme and the actual cost was a pleasant surprise for most. One employer commented that he was “staggered by how cheap it was”. Clearly, insurers and advisers need to ensure the associated costs are fully understood, as it is a key factor in decisions regarding benefit provision.

The final verdict

There were lessons learnt from both sides. SME business owners understood the need to offer attractive benefits to retain and recruit staff and learned that Group Life is an affordable option. We learned that product information must be clear, upfront and jargon-free, and that it is important to present the cost centre stage.

As automatic pension enrolment nears completion, it’s no longer possible to get away with a lacklustre benefits package. SME business owners should take this opportunity to think about the positives of improving their offering. Financial advisers have a responsibility to get these conversations started and insurers must provide products that are simple, effective and appealing to this audience.