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Mind the protection gap – Paradigm

by: Bob Hunt
  • 09/04/2015
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Mind the protection gap – Paradigm
Consumers are in need of individual protection more than ever before and its up to the adviser community to ensure this is tied up neatly with mortgage information, writes Bob Hunt, chief executive of Paradigm Mortgage Services.

The ‘protection gap’ is an issue often high on the financial services news agenda and, given the growth in the gap, I suspect it is always likely to be. In recent weeks however, particularly in advice circles, it appears to have been reignited.

Jonathan Evans MP, chairman of the All Party Parliamentary Group for Insurance and Financial Services, recently suggested the PPI mis-selling furore has somehow made the word protection “toxic”. Evans argued all types of protection have taken on a “toxic connotation” which makes people, who probably are in need of protection like never before, much less likely to want to take out policies.

Firstly, while I can see the logic I’m not sure I agree with the observation. It suggests that we are dealing with a general public unable to get to grips with the differences between PPI and wider protection policies which protect against job loss and health issues. The PPI scandal has gained such notoriety and affected so many people that I believe the UK population can determine the difference mis-sold policies and suitable protection policies.

The role of the adviser is to explain those differences and to make sure the consumer is clear about what they are signing up to, what they will and won’t be covered for, and when they will be able to claim on such policies. Any confusion about PPI and protection can surely be nipped in the bud very quickly at the advisory end, if that information gap even exists at all.

What Jonathan Evans has got right, however, is the fact that consumers are in need of protection like never before, and I get the sense that these underlying demand drivers are ensuring a much more engaged advisory community. Certainly, over the years this level of engagement has ebbed and flowed and we’re all acutely aware that, for mortgage advisers in particular, growing mortgage advice activity will often mean less of a focus on protection. However, I hope we have all learned the lessons of a post-credit crunch environment which proved that diversification is always desirable.

Certainly from our own perspective we have seen a much greater level of engagement with the protection market, to such an extent that we felt it appropriate to launch our own dedicated proposition, Paradigm Protect. The idea being to develop advisers’ own offerings if they were already offering protection advice but also to engage those who were not active in the market.

The ability to offer a much more rounded range of advice services to clients should certainly not be under-estimated. Sometimes it seems odd that a firm will only be offering mortgage advice rather than covering off other client needs such as protection, GI, conveyancing, legal services – the list goes on. It’s an old mantra but rings just as true today, why let your client go elsewhere, potentially to a competitor, when you have the opportunity to deal with all these areas?

Some networks look like they are compelling their advisers to cover off protection and I would hope that the majority of advisers are doing this as a matter of course and that compulsion should not be necessary.

In a post-MMR environment where the mortgage broker community stands proudly at the centre, it makes perfect sense for those same advisers to ensure clients have the means to pay their mortgage should they lose their jobs or be off work because of long-term illness or injury.

I fully expect continued engagement in this area and, with propositions like our own, the avenues are open and clear to make protection advice and access to the best products and terms readily available.

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