It is important we stay focused and positive as the industry attempts to understand how it may progress following a tumultuous half year. Comments made by Kate Barker, a member of the Bank of England’s Monetary Policy Committee said there would not be a slump in the UK housing market, although she did suggest the market is still volatile and as a result, the industry should remain vigilant. Her speech was measured and balanced – I believe that the mortgage broking community needs to be shown a realistic picture of what could lie ahead, of course with the caveat that nothing is set in stone. It was refreshing to hear Barker making an attempt to do just that.
One firm that perhaps struggled to show a clear picture of the protection market was Swiss Re in its Claims Watch 2007. It said it could not speak about term assurance or income protection in its report as the data supplied was not of sufficient quality or quantity for publication.
It decided, therefore, to concentrate on critical illness (CI) insurance. It is not good reading. In 2006, new critical illness insurance sales fell again and are now at almost half the level of new sales recorded in 2002. The reinsurer also studied interview transcripts of clients who had bought CI policies and a number of them stated the claims process was difficult, time consuming and confusing.
It is no wonder then, having read the report, that mortgage advisers are often unwilling to sell CI insurance to their clients, despite the fact that this, along with income protection or family income benefit, are often more suitable than just plain old life insurance.
If the client experience is rarely satisfying, and with further changes to ICOB on the way, it appears there is going to be little chance for these products to survive. This would be a massive blow to the market.
The report has a stark warning for the industry. It states: “Perhaps, more importantly, brands could be at risk if the right level of focus is not given to the claims arena.” At a time when brand is everything – cue Northern Rock – I am sure insurance companies, lenders and distributors are all in tune as to how important brand preservation is during a downturn in the market.
At the recent national The Mortgage Event roadshows hosted by Mortgage Solutions, one of the guest speakers asked delegates to stand up if they had, or knew someone who had suffered from cancer. About 90% of the room stood up. Every mortgage broker has a responsibility, in respect of treating customers fairly and MCOB to ensure the client understands their responsibility to pay back the loan they are acquiring, and it is the joint responsibility of the lender and broker to ensure the client is in position to do so. If anyone is in the unfortunate position of being struck by unemployment or sickness, their ability to pay back the loan will be compromised. But until the protection industry creates a product that can be understood by both mortgage advisers and their clients, one with a positive claims process that is not drawn out, I see little chance of the 2008 Claims Watch having more positive news. n
