REVIEW
PROTECTION
In tough times, it pays to spread your professional wings Alan Lakey director, CIExpert
W
hen I talk with networks and affinity groups, I often hear the disconcerting news that mortgage brokers only arrange protection insurance for one in four mortgages. Many reasons are given – the broker is too busy dealing with enquiries, or the broker lacks confidence when discussing protection, and the old chestnut that the broker lacks sufficient knowledge regarding protection. Let’s be honest: it’s not good enough. Mortgage borrowers deserve better – and don’t forget that there are other canny advisers out there looking to poach clients, which may also involve arranging their next mortgage, remortgage, or product switch. Brokers cannot afford to risk losing valuable clients, particularly with the economic woes that lie just around the corner. There are numerous reasons why brokers need to immerse themselves in the world of protection. First, there is an obvious financial impetus. A fully comprehensive mortgage protection plan will almost certainly provide a commission payment higher than the procuration fee from the mortgage. Two income streams from the one mortgage – surely that makes sense? A secondary financial motive is that, like regular mortgage reviews, it is likely that future protection reviews will result in an upgrade to the protection. Critical illness plans are improving all the time, and resources such as CIExpert
22
enable a swift review, allowing an upgrade conversation to take place. So why wouldn’t a broker assist his/her clients when they have an obvious and immediate protection need? Is it a lack of knowledge, a fear that an incorrect recommendation might bounce back as a complaint? There are two ways to address this. The first and most obvious is to accumulate the relevant knowledge, networks, affinity groups, and insurers, all offering a range of learning materials, whether it be face-to-face meetings, webinars, or podcasts. CIExpert offers copious amounts of information regarding critical illness plans, claims statistics, and the various conditions included.
The mortgage world will be in turmoil for the next two years – maybe longer – and those brokers who ignore protection may come to regret their head-in-the-sand approach Those brokers who remain unwilling need to consider a liaison with a protection specialist. This form of signposting has proven itself over the past two years, with firms such as Vita assisting MAB members, and Future Proof doing the same for SJP partners. This offers benefits for both parties, allowing the broker to focus on mortgages and the skilled adviser to assist clients in a more focused way than a busy broker could. The mortgage world will be in turmoil for the next two years – maybe longer – and those brokers who ignore protection may come to regret their head-in-the-sand approach. The last economic crisis
MORTGAGE INTRODUCER NOVEMBER 2022
forced many out of business because they did not have other types of business to fall back on. Now, let’s factor in the incoming consumer duty requirements. Firms should already have a framework showing how their actions meet the new requirements. Would a broker be meeting these rules if he arranged a long-term debt and failed to offer a solution to the potential for premature death, diagnosis of a critical illness, and possibly loss of income due to ill health? One of the key messages relates to consumer support; therefore, ignoring protection needs must be termed a consumer duty failure with potential consequences. Let’s chuck another concern into the mix. Brokers have a common-law duty to assist their clients, a duty buttressed by the consumer duty obligations. Let’s not get this tested in a courtroom. Imagine the scenario in which a broker has assisted a client in accumulating a £250,000 debt and failed to raise the subject of protecting that debt. Some time later the client dies, and the person’s spouse, assisted by a predatory claims management firm, files a complaint. What will the Financial Ombudsman Service decide if that complaint reaches their desks? They are likely to ask for the file and scan it for evidence that the subject was broached. A lack of evidence might compel the FOS to find in favour of the complainant – and don’t forget, the FOS can award compensation of up to £355,000, a figure that would likely bankrupt many small firms. So, whether as a defence mechanism or as a means of providing a more rounded service, brokers need to stretch out and better understand how to advise on protection. Failing that, a liaison with a specialist firm would appear to be the answer. M I www.mortgageintroducer.com
