Speaking with Mortgage Solutions, Phil Jeynes, director of corporate strategy at Reassured, said most first-time buyers did not consider protection as they presume the life circumstances which often require insurance do not apply to them.
Jeynes said: “Relatively young people who are first-time buyers, possibly don’t have a family, partner, or dependent. So, they’re thinking, ‘the risk here is that I die, and that will be very sad for everybody. But financially, nobody else is any worse off. So why do I need life insurance?’ And actually, that’s perfectly fair.
“But they probably don’t think about what happens if they get ill, or have an accident, which means they’re not able to work. For most people who are of working age, that’s far more likely – thankfully – than them dying prematurely.”
However, he also noted that leaving it too long to take out additional protection such as life insurance could be to the detriment of a client as they will have aged and potentially be given a higher premium.
Breaking it down
Jeynes said most first-time buyers were at their most stretched financially, so additional expenses like protection were not always of interest.
He also said the practice of presenting a “full suite” of protection options upfront and adding a premium of £100 a month to their expenses was the “right thing to do” but “completely unrealistic”.
He added: “It’s a way of saying, ‘I’ve looked at your needs, and here’s the Rolls Royce option, here’s what I have to recommend you have, because this sets you up for everything.
“’But let’s be realistic about it, there are ways that we can chunk this up. We can start you on something that covers the basics. And then we can review in a year’s time, two years’ time or five years’ time’.”
Jeynes suggested selling first-time buyers a basic level of protection, like income, then adding on to the policy to fit adapting situations. He said the inability to work because of illness was the most likely scenario for people getting on to the housing ladder so it usually was the most relevant type of protection.
He said increased flexibility in the protection market had enabled the tweaking of policies.
“Most insurers have flexibility built into their products that you can flex up and down. We were seeing a lot of people, particularly over the pandemic, who had to cut their outgoings for a period of time, because they weren’t working or earning as much as they were pre-pandemic,” he added.
He said many policies now allowed people to skip premiums and temporarily reduce cover.
Jeynes said: “It’s not a buy at once and done type policy anymore.”
Better communication
Jeynes said apathy towards protection and a lack of effective industry communication was affecting takeup.
He said the financial services sector hadn’t been “brilliant at communicating with young people about this type of issue”.
Jeynes also said the idea that millennials were a self-centred group who wasted money on expensive coffees and avocado on toast was a cliché and made the sector sound old.
“The oldest millennials are in their 40s. So, you’re not talking about these young whippersnappers that are a completely different generation. We talk in big generalisations, and we don’t really connect well with the younger demographic on the whole.
“So, I think we can do much more to speak sensibly to people and put things in their language,” he said.
He said the best thing a mortgage broker could do was introduce the concept of protection early on in the advice process.
Jeynes added: “I think the mistake a lot of mortgage brokers make is they deal with the pressing need, which is the mortgage, and then only talk about protection right at the end once the mortgage has gone through. Therefore, it feels and sounds a bit like an afterthought.”
He said this could also make protection feel like just an upsell to clients.
The broker has doubled its revenues in the last financial year compared to the year before and it is aiming to double the number of brokers over the next 12 months. It also aims to double the earnings of its brokers.
It said that it would do this by expanding the number of products brokers can offer and would provide brokers with business growth support and training.
Access said that it wanted to help its advisers earn six-figure sums by helping them “implement bespoke strategies into their own core business”.
The firm added that a number of brokers join through the company’s academy, which helps them take CeMAP exams, and it takes people who used to work in banks but want to become mortgage brokers.
The company said that half the brokers specialise in protection and the other half advise on both mortgages and protection. Access also has general insurance permissions.
Karl Wilkinson (pictured), chief executive and founder of Access FS, said: “It’s a great achievement that we have managed to attract one hundred advisers to join us in just five years from a complete standing start.
“We try to do things a little differently from other broker firms, creating a collaborative environment for brokers to help each other rather than competing with each other. There really is plenty of business out there to go round.”
He said that protecting the customer and providing best advice was its number one priority, so its compliance standards were “high but with a common-sense approach”.
Wilkinson added: “Many of our brokers who have worked at networks and other broker firms report that the way Access FS works is like a breath of fresh air compared to what they have known previously. Our ambitions now are to continue to grow and to double in size in the next twelve months”
Speaking in an in-house produced video, Christine Newell (pictured), mortgage technical director at Paradigm, said that Consumer Duty was “huge and very significant” and that a lot of attention was being paid to vulnerable clients and the expectation of treatment of such clients.
She continued that mortgage firms needed to think about the entire customer journey, from financial promotion, to explaining the mortgage and underwriting journey, how your advice adds to that, the price the clients pay and what happens at the end of the policy and how you keep up communications with your clients.
Mike Allison, director of protection at Paradigm, added that it was a “real sit up and take notice moment” for all firms and said that it is “not going away for any firm”.
He said that the costs could be substantial, with one-off direct costs of implementation pegged at £21.4bn between 51,000 firms that the Financial Conduct Authority (FCA) regulates with annual direct costs estimated to be between £74m to £106m.
The FCA said that it plans to issue final rules on 31 July and implement in full by end of April 2023.
Key foundations for Consumer Duty implementation
Both Newell and Allison said that ensuring that Senior Managers and Certification Regime (SMCR) was properly implemented would be vital.
This replaced the Approved Persons regime, and aims to improve culture, governance and accountability within financial services firms by improving individual accountability and awareness of conduct issues in firms.
Newell added that ensuring vulnerable customer practices were “fit for purpose” and spending time on training was also important as a foundation for Consumer Duty.
“This is particularly apparent if a firm uses a lot of specialist lenders as it is likely that clients who need a specialist lender to achieve their financial objectives are much more likely to be considered vulnerable,” she explained.
Allison added that firms processes around protection needed to be clear, whether that is brokers advising clients themselves, referral to specialists within the firm or outsourcing to a third party.
He explained a mortgage adviser must “fully look” at potential harm that could occur, noting that one in two people getting cancer, the average age for acquiring a disability is 53 and average age of protection claim is 37
“This isn’t something that you can kick down the street for another conversation later on, people are claiming at 37 and if they didn’t have the right advice then there could be issues.
“Consumer duty doesn’t state that everybody needs to advise on life cover. But it could be an opportunity for firms who struggle to fit protection in to their business models to signpost the client to another firm who could address their needs and get the right outcome,” he said.
Newell added: “I find that a few brokers who are quite stretched…leave the protection conversation to a later date in client journey, so it can get lost or perhaps never take place, leaving a client open to that foreseeable harm. Any firms not taking all of these things into consideration with own processes and business models are going to struggle to meet the standard and could fall foul of new principle.”
Actions that firms can take
Some actions that firms can take include team meetings that discuss how clients are currently served, training provided to staff, information collected, vulnerable customer treatment and how this could change under Consumer Duty to ensure everyone is on the same page.
Both suggested that appointing a Consumer Duty champion to coordinate a firm’s approach could be a good idea.
Allison said that asking newer members of staff to review how people interact with clients could also be a good idea.
“Newer members of staff are less likely to be entrenched in the business and maybe be able to offer up-to-date ideas and changes,” he said.
To view the whole video, along with other content that can help prepare for Consumer Duty please click the link here.
The rebrand includes a new logo, updated website and tools to help advisers write more protection.
The branding and website launched this week. The website site aims to provides more technical detail on how LifeQuote can help brokers overcome the risk of writing protection, and will offer advisers help on achieving better consistency and lower the risk of commission clawback.
The website includes the LifeQuote Protection Revenue Opportunity (PRO) tool, where advisers can add some basic commercial figures to find out how much time they can save and additional protection revenue they can earn.
LifeQuote is part of Direct Life & Pension Services and has been providing protection solutions for over 30 years. It currently offers protection insurance to over one million customers.
Last year, LSL Property Services, which includes the Primis Mortgage Network and TMA Mortgage Club, acquired a 60 per cent stake in the business. The investment will allow LifeQuote to focus on increasing the number of partners it works with and provide more opportunities for advisers to grow their protection business.
Iain Clark, chief commercial officer at LifeQuote, said: “The rebrand is an exciting step in our journey to strengthen LifeQuote’s position in the market – no one makes selling or administering protection easier. We have a strong heritage of innovation, being the first technology provider to launch multi-benefit quotes in 2006.
“The new website includes our recently expanded range of products and services, and with technology like our PRO tool advisers will be able to calculate how much time they could save on each case and how much more protection revenue they could be making with us.”
Recent weeks have seen a succession of large insurers publish their claims stats for 2021, including the likes of Royal London and Scottish Widows, while the Association of British Insurers (ABI) has published data for the industry as a whole.
According to the ABI, for example, 98 per cent of claims were paid out with almost 300,000 new claims paid out across the year. Claims for issues related to the pandemic almost doubled on the year before, the trade body’s statistics showed.
And while some brokers told Mortgage Solutions that these claims figures help them overcome client cynicism, they argued that there are other barriers holding back a wider adoption of cover such as ignorance over what’s included, whether they really need protection, and the likely cost.
Dispelling myths
Dominik Lipnicki, director of Your Mortgage Decisions, said that there is a “huge misconception” that protection policies do not pay out, but it is a broker’s duty to show that successful claims are the norm.
He noted that inflation and higher taxes are putting budgets under pressure, which may tempt clients into ditching their cover. However, he added: “As an industry we must keep in regular contact with clients, ensuring that they are protected within their budget and requirements and if those change, so should our advice.”
Bradley Brandon-Cross, director of Commercial and General, said that claims data helped dispel myths around protection cover, noting that in the current climate it was crucial to educate clients about the benefits of insurance.
He said: “We don’t want people to be underinsured because they are trying to cut costs and mistakenly believe that their policy wouldn’t pay out anyway.”
What is covered?
Imogen Sporle, head of term finance at Finanze, said that scepticism around protection products is common among clients, but suggested that it’s not claims data that helps overcome this opposition.
She explained: “Rather than using facts and figures on how much has been paid out by an insurer, I find it’s more beneficial to focus on the amount of illnesses and circumstances they pay out for. This gives the clients confidence that they do not need to have a super specific terminal illness in order to have the life insurance pay out.”
Protection has always had to be ‘sold’, according to Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, who argued that it can be difficult to shift the attitude of clients that ‘it’s never going to happen to me’.
She added: “It amazes me that people are happy to spend money insuring their mobile phone but are not particularly interested in insuring their income.”
King also pointed out that she has always used provider stats to demonstrate that if all relevant information is properly disclosed by the client, there is no reason why a claim would not be paid out.
“The difficulty is persuading people that protection is a benefit worth having.”
Justifying saying no
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, suggested that all too often the apparent scepticism over payouts is simply an excuse from clients in order to justify taking the risk of not protecting their family and home.
He noted that insurers have released claims data for years now, yet clients simply choose not to believe them, adding: “Having claims figures published by more independent bodies, such as the ABI and the FCA would likely help to give the figures more credibility in the eyes of a cynical public.”
Lewis Shaw, founder of Shaw Financial Services, said that claims stats were helpful to counter client suggestions that policies do not pay out “which we all know is nonsense”.
However, he emphasised that ultimately it’s down to a client’s emotions whether they opt for a protection policy.
He added: “In the main, the only people that say life insurance doesn’t pay out are the ones that want a way of saying ‘I don’t want to pay for it because I don’t think I’ll need it, but I don’t have a compelling enough reason to say no to it’.”
Highlighting additional benefits
Barr noted that what claim stats rarely highlight is the fact that policies often come with a host of additional non-financial support services, such as counselling and bereavement services, free legal help and even CV writing.
He continued: “The level of help and assistance a good insurance plan can deliver at the time you most need it is very underrated.”
Lipnicki added that in the past, too many protection policies were bought on price alone, with that “race to the bottom” meaning that clients may not have received the protection they needed.
“The plans available now are better and more innovative than ever. Value rather than the monthly price alone is where sound advice should sit,” he concluded.
Everyone can afford protection
Some brokers may have come across clients who point to the cost of living situation as a reason why they cannot take out a protection policy.
However, this idea was given short shrift by Shaw, who suggested that if a client cannot afford £40-£80 a month for a protection policy, then “in my mind they can’t afford the mortgage”.
He continued: “After all, most can afford a takeaway, a TV package, some new trainers, etc. It’s about prioritising the right things ahead of the wrong things.”
King agreed with this point, adding: “I think there is also a myth that it is expensive when for many the price of a couple of takeaways a month would go a long way to providing them with some financial protection in the event of long term sickness.”
Are attitudes towards protection changing?
Sporle suggested that the attitude towards protection has actually improved since the pandemic, with increasing numbers having seen the impact on their finances of being too unwell to work.
She added: “Although the cost of living has risen, I still find the clients are now happier to earmark earnings for this safety net.”
Brandon-Cross agreed that the pandemic had helped “embed the message” that it’s important to plan ahead for the unexpected.
“We may not want to talk about it but the data on successful claims helps advisers to showcase why it is a conversation worth having,” he added.
Having a policy written in trust means that the policy sits outside of a client’s estate, meaning that payouts go directly to the intended beneficiaries, without having to wait for the completion of probate.
The network noted that the processes different providers have for writing life cover in trust can vary significantly, and pointed out that it’s crucial for advisers to have all the tools necessary for supporting clients looking to make use of trusts.
The ‘trust hub’ includes a host of podcasts and webinars explaining how to complete the process for each of the main protection providers, as well as a ‘Trust Guru’ resource. The network says this maps out most of the generic questions advisers might ever want to ask about how to write a policy into trust.
The hub also boasts sales aids to help advisers explain the benefits of trusts ‒ and what is involved with being a trustee ‒ to clients, alongside provider tools, documents and literature around the subject.
Vincent O’Connor, director of products at The Right Mortgage and Protection Network, noted that sometimes brokers struggle with the job of writing life cover policies into trust, though praised providers for investing in technology that makes the process easier.
He continued: “When you look at the diversity of the trust processes from each of the main providers; this can create challenges for advisers because they are all quite different. That’s why we’ve created a central resource for our advisers called the Trust Hub.
“It’s generic and it aims to help and support advisers with the practicality of writing more protection policies into trust – both new policies and those already in force.”
Earlier this year the network launched a ‘vulnerability hub’, aimed at recognising vulnerability in their clients as well as supporting advisers’ own wellbeing.
In total payouts were worth £632m, a new record high for the mutual insurer, accounting for more than 84,000 claims.
Around 96 per cent of term life insurance claims were paid out, at an average value of almost £80,000, while 99.9 per cent of whole of life assurance policies were paid out, at an average value of £3,906.
In total more than £174m was paid out in life insurance and terminal illness cover over 2021.
The insurer paid out 91.7 per cent of critical illness claims, totalling more than £136m, with an average payout above £70,000. According to Royal London, most of the claims which were declined were due to not meeting the policy definition.
A little over 90 per cent of income protection claims were paid out, including those already in payment, dropping to 82.4 per cent of new claims. Royal London said the most common reasons for an income protection claim were musculo-skeletal issues (36 per cent), cancer (16 per cent) and mental health disorders (10 per cent).
Almost £25m was paid out in claims related to Covid-19, doubling the amount paid in 2020. Around one in 10 Covid-related claims were for life insurance policies, while nearly £69,000 was paid out in income protection claims to those unable to work due to contracting the virus.
More than 700 policyholders made use of Royal London’s Helping Hand service, which offers tailored support and access to a dedicated nurse for customers and their families. The top reasons for referrals were bereavement (23 per cent), cancer (16 per cent), mental health (15 per cent) and orthopaedic issues (15 per cent).
Craig Paterson, chief underwriter at Royal London, said that the dramatic increase in Covid-related payouts “demonstrated our support as a provider over the past two years”.
He continued: “In addition to paying claims for Covid, our customers are also able to get support through Royal London’s Helping Hand service, such as help with bereavement, mental health, and returning to work after illness or injury. Customers and their families can receive access to the support of a dedicated nurse with tailored and personal support whenever it’s needed, for as long as it’s needed.”
The Royal London figures follow data from the Association of British Insurers which revealed that 98 per cent of both individual and group life insurance, income protection and critical illness claims were paid out across the protection industry in 2021.
Brokers told Mortgage Solutions that looking beyond the mainstream residential and buy-to-let markets makes sense, particularly given the potential market difficulties ahead, but suggested that this can be harder than it looks.
Just this week Coreco announced that it was setting its sights on commercial, new build and equity release as part of its own diversification strategy.
But what other areas are brokers looking into? And how important are partnerships for diversifying intermediaries?
Developers need help
James McGregor, director of Mesa Financial, said his firm is always looking for new areas where it can diversify to add value to its client base. He explained: “As a business our whole model was built around servicing our clients financial positions as opposed to focusing on the products.”
As a result, Mesa currently has two big areas of focus for diversifying its business, starting with development.
McGregor added: “The development space is one we have always had a hand in, but believe there is huge growth to be had for advisory firms within this space. As the landscape becomes a lot tighter for developers, with the cost of materials and the cost of lending increasing, and contractors looking more vulnerable by the day, developers will soon need advice navigating the lending market a lot more than they previously did.”
Branching out makes sense
Aaron Strutt, product and communications director at Trinity Financial, noted that in recent years his firm has helped arrange commercial mortgages and bridging loans alongside regular residential and buy-to-let mortgage business.
He continued: “Commercial mortgages can be pretty specialist, so we’ve worked with Connect for Intermediaries and The Loan Partnership to ensure our clients get the best possible deal.
“We could quite easily be entering a tricky period for the mortgage market, so branching out to try and get more business seems sensible.
“More of our brokers are keen to register and arrange equity release to tap into the older borrower market.”
Specialist help needed for struggling borrowers
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management, said that one area she’s keen to do more with is adverse and sub-prime mortgages, off the back of the ongoing cost of living crisis.
She explained: “It may well be that we see more missed payments and defaults on credit agreements in 2021 through to 2022, with consumers borrowing more to keep up with their rising costs of living. Specialist advice from a qualified whole of market mortgage broker will be vital in these situations to ensure that they can access the most suitable mortgage options.”
Bickford added that this situation would also impact later life borrowers, which “spurred me to spread the word on how releasing equity from their homes can potentially be the answer to a more comfortable retirement”.
Get up to speed with equity release
This was echoed by Dominik Lipnicki, director at Your Mortgage Decisions, said that diversification is important for brokers, noting that his firm looks at assess client’s financial circumstances across the board “which means that advice and referrals are in their best interests in areas such as estate planning, life and health insurances and financial planning.”
He added that brokers who are not qualified in equity release should still look into the sector, or at least work with a referral partner for those instances where a client over 55 might benefit from releasing equity in their home.
“In our aging population and with the cost of living crisis biting, all mortgage advisers should understand how equity release works,” he concluded.
The right skillset
Protection is also a focus for McGregor, who explains the priority has been building out the correct in-house expertise .
He said: “It is rare you come across advisers that have a full skillset in advising on a client’s full protection needs. With the right people in house this can be a huge growth area.”
How to get diversification right
So what do brokers need to bear in mind if they are looking to branch out into new areas of the market?
For McGregor, it’s crucial to first partner with firms that are experts in the field before venturing into that market yourself. He added: “This can be a huge knowledge bank; you can then decide how this can then transfer into your own business.”
Bickford adds that passion is crucial. “Simply offering a transactional service, because it is popular, won’t work. You need to enjoy the topic and feel passionate about making a change, or helping clients in that particular area.”
However, it’s also important that brokers are aware of their own limits. Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, notes that standard residential is now a very complex business, with more and more cases having complicated features, which makes it important for brokers not to spread themselves too thinly.
She added: “I tend to outsource anything too specialist ‒ such as bridging ‒ as you cannot be good at everything.”
