While independent mortgage brokers are largely innocent and have always ensured that clients are informed as to what protection they are buying, they too have felt the after effects of those financial institutions that sold policies on the basis that it would help, or was compulsory, with a credit or loan application.
This has had a two-fold effect. Firstly, clients are wary of purchasing PPI cover and secondly, brokers have been put off from offering these products. However, Accident, Sickness and Unemployment (ASU) are vital protection products, and when sold properly provide clients with critical cover that will keep a roof over their heads.
The recent Competition Commission rules change on the sale of ASU products has arguably further compounded the problem. The burden of increased regulation has created a fear of advising on ASU products, when in reality these rules are necessary to prevent the previous miss-selling from happening again. They also set out the steps brokers must take to ensure they can no longer be accused, however falsely, of treating customers unfairly.
So how can you make yourself mis-sale proof? Well, this is not as onerous as it sounds.
Firstly, talk to your clients and find out what they need. What is their income and savings status and how would they pay their mortgage and bills if unable to work? From this foundation you can establish the type of cover they need, i.e. short term accident & sickness protection, long term PHI, cover against unemployment etc.
Find out how much monthly benefit your clients would require, how long they could survive on savings and at what point they would need the policy to start paying out. In addition, information on the terms of the client’s employment contract and any other policies they may already have in place can also be valuable in helping to accurately assess their individual needs.
Secondly, establish their “acceptability”. For an Accident & Sickness policy this involves investigating if they have any pre-existing conditions, have seen a doctor recently or know they will need treatment in the future. For unemployment, are they aware of pending redundancies? Are they self employed, a company director or the owner of a business? Do they work part time or is their job short term or seasonal? And, have they been with their current employer for more than six months. All of this is vital information that can affect a client’s eligibility for cover.
Finally, ensure that you have your own ducks in line. Follow an established and compliant quote process that includes:
• Documenting the client’s personal details
• Researching which products best match the client’s needs
• Providing a quote pack including insurer details, premium information, a demands and needs statement and a key facts/policy summary
• Documenting all meetings to demonstrate that the client was fully aware of what they were buying, that it was optional and independent of any credit offer
If you are arranging the mortgage and are subsequently arranging cover within 30 days, you must give the client a 7 day “cooling off” period before closing the sale on the insurance and issuing a “schedule 4eii” document. If you did not arrange the mortgage you can issue a “schedule 4ei” document and the 7 day cooling off period does not apply.
With unemployment figures high, the economy slow and interest rates likely to rise there has never been a better time to talk to your clients about ASU protection. So armour up, make yourself mis-sale proof and help to protect your clients with these vital insurance products whilst also boosting your bottom line.
Geoff Hall is director and general manager of Berkeley Alexander
