Speaking at the Later Life Lending Summit in London – hosted by the Equity Release Council – Neil Uttley, key account manager at Aviva, said that in its book of business, around a third of its lifetime mortgage cases have been “enhanced” due to a customer’s health or lifestyle.
“That number has been improving, I will say, over the last few years, but it’s not where I would want it to be,” he said.
An enhanced lifetime mortgage is a form of equity release where lending criteria are based on personal health and lifestyle questions such as whether a borrower smokes, has high blood pressure or suffers from diabetes.
Uttley said only half of advisers filling out a Key Facts Illustration (KFI) answered medical questions, which could make a big difference in pricing, loan size, loan to value (LTV) and estate planning.
“We’re in the Consumer Duty age now, and we’re under the microscope as a sector, and we’ve got to avoid those customer harms, and [by] not going through this process [of collecting health and lifestyle information], a customer could potentially lead to a foreseeable harm if you’re not optimising the outcome for them,” he said.
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He estimated that there were currently around three lenders that would take this information into account, and others might do so in the future.
Uttley said that for advisers, it was a “simple case of obtaining the information and inputting into your sourcing systems”.
“We’re not asking advisers to go and duplicate workloads or to do things twice. If you’re inputting the right information into your sourcing system, it will give you the right outcome.
“From a business perspective, you’re not looking for a shiny, separate product that says ‘enhanced’ on it because of those factors; it all goes into the mix. Ultimately, the end outcome is lower interest rates or higher LTVs, and in many cases, as we will assure you in an example at the end, it could be both of those two things,” he said.
‘Under-disclosure’ is an issue
Uttley said there was an “under-disclosure issue”, pointing to blood pressure as an example. Around 60% of customers over 65 have high blood pressure, but only 30% of applications have that included.
He attributed the under-disclosure to a number of issues, including the assumption that poor health or lifestyle will make financial products more expensive, possible reticence to share private health information and an assumption that a medical would be involved.
Uttley said that in the case of enhanced lifetime mortgages, disclosing health could lead to better rate, higher loan amount or LTV.
“It’s the job of advisers to ensure that the positioning is done upfront and done in a way where the customer is going to be open and transparent about the process in order to get the best, optimal outcome because this is a sensitive subject.
“It’s doing it in such a way, perhaps giving examples of other customers you’ve helped, and say: ‘By telling me this, we can make sure that we’re obtaining the best possible outcome that’s on the market for you. If we don’t do that, we’re obviously going to be excluding things from the equation.’ The worst that could happen is nothing happens, the rates stay as they are,” he said.
Adviser question set needs to be ‘fit for purpose’
Uttley said it was important for advisers to “make sure your question set is fit for purpose with all the lenders that are operating in this market”, and “incorporate that into your fact finds”.
As an example, instead of asking a customer if they had high blood pressure, a more open question asking whether a customer was on medication to manage high blood pressure might open up more of a conversation.
Uttley said it didn’t send people for a medical, but it may ask for some extra information in certain instances – but that would not delay an application or completion.
He also added that advisers should also question their own mindset and not assume that a specific condition wouldn’t qualify.
“Don’t assume; nothing really should be off the table. You put the right questions in, get the right answers,” Uttley said.
“Multiple conditions can lead to a multiple of different discounts that are available to the customer. It is not a one-size-fits-all. It is not a separate product. It affects future borrowing as well as it does the initial loan. It can lead to larger estate, which is good news for the customers’ beneficiaries, and the outcome is the customer may have more available to them, should they wish to come back in future to borrow with a further advance,” he said.
“I would go back and just challenge any assumptions that you made before, ensure that your research process is fit for purpose. Go back to your fact finds… and make sure you’re covering all the bases, and you can give that personalised advice.
“The most important one is evidencing those discussions you have with customers, especially if you’ve got somebody who’s perhaps refusing to give information, then that’s documented,” he added.
