Cover is often the ‘elephant in the room’ in the rush to seal a mortgage, yet raising its profile must be a priority for brokers, writes Gary Adams
Everybody reading this page will understand the importance of protection, but those who spend their working days immersed in the world of mortgages could be overlooking the fact that it does not often enter the minds of clients unprompted – and raising the subject can be difficult.
Just picture it: the glamorous young couple, all smiles and trembling excitement at the thought of having a garden and not needing permission to nail hooks into the wall – and then, because you want to do the best for them, bringing up the topic of protection. As Monica Bradley Associates managing director Monica Bradley puts it: “The ‘have you considered what would happen if…’ conversation can be extremely awkward.”
With this in mind, we thought it pertinent to seek views on why bringing up protection is such an essential part of the home-buying process itself, why many brokers shy away from doing it, and what can be done to reverse this.
Regarding the first part of this modest study, almost everybody we spoke to was in agreement that timing was one of the most important factors. Simply put, integrating the mortgage application process and protection into a single event increases the chance of some form of protection actually being taken out, rather than at best being kicked down the road like the proverbial can and, at worst, forgotten about entirely.
London & Country Mortgages head of protection Lucy Brown explains: “Rarely would people start the day thinking that they need to prioritise organising life insurance. Therefore, any trigger that opens up an opportunity to talk about protection is important to seize.”
Legal & General Mortgage Club director Kevin Roberts expresses a similar point of view, saying that once borrowers finally have the front door keys in their hands, “they often forget about protecting the very thing that enabled them to buy their home”.
Bradley paints an even more extreme picture: “While we as brokers obviously see the context of the substantial amount of debt and, therefore risk, clients don’t tend to join the dots about how this will be repaid should their circumstances change, or indeed understand that the monthly mortgage payment needs to be met, regardless of the scenario.
“It still surprises me how some clients are under the misconception that if they fall seriously ill or lose their job, the ‘bank will take care of them’ if the worst happens.”
A further reason for ensuring protection is brought up is the expertise a broker can bring. Next Step Advice director Craig Hammond says: “As with any financial product, insurance policies can differ wildly from provider to provider, and the terminology used can sometimes be difficult to understand.” He adds that simply picking the cheapest cover, which any client would be tempted to do, may leave them in a risky position.
However, despite the quality of these arguments, it cannot be denied that many mortgage brokers are hesitant to raise the issue of protection when dealing with clients. The reasons why, as alluded to in the opening of this piece, range from the psychological to the practical.
Primis proposition director Vikki Jefferies confirms that protection “can be a sensitive subject”. She notes: “Clients are often willing to insure their tech, pets or valuables but thinking about how to pay off a mortgage should the worst happen can be a trickier topic to broach… Lots of people simply don’t believe it will ever happen to them.”
The Exeter director of distribution and marketing Steve Bryan, meanwhile, believes that although discussing a client’s health during the process can be awkward, “these conversations can be particularly difficult when the broker suspects that the client suffers from poor health”.
Brown adds that clients will often challenge the broker as to why they really need it, which can be difficult to deal with.
Sometimes, however, the reasons why may be rooted in matters less cognitive. “Time is a big consideration,” says Roberts. “Advisers are often busy helping clients secure a mortgage, so it’s easy to move on to the next customer, rather than protecting the previous one.
“However, perhaps the biggest reason is that protection is not part of their overall process and business model. Many brokers have either forgotten how to sell protection or are unsure how to approach the topic.”
Other reasons cited included the fact that some brokers may be concerned over trying to sell too many products – either fearful of looking avaricious or risking the selling of the mortgage itself – and, as Paymentshield sales and marketing director James Watson says, simple habit. “Advisers overlook protection for a couple of clients and get set in a behaviour where that becomes the norm,” he says.
The obvious takeaway from all of this is that encouraging more brokers to get on board with protection can only be a good thing for the client and the industry. Mortgage Strategy was keen to ask how.
Intrinsic managing director Gemma Harle believes that change may occur through a mandatory regime, ideally from lenders; not in having protection, “because that wouldn’t be fair”, but she can see brokers having to prove that “at the very least, a conversation was had”. Harle adds that the mortgage market may be put under pressure to enact reforms because of progression in other financial services sectors, giving the FCA’s consumer credit review as an example.
Others see a change in how brokers do business as the way forward. Roberts in particular is convincing when he says that “advisers should be looking at their business models to see how they can build protection into their sales process”.
He adds: “This could either be through passing opportunities on to a specialist within the business, or simply giving brokers more training so that they are not just a mortgage specialist, but a protection specialist too.”
Education, education, education
More education, however, is the answer that kept on coming up. “Education is absolutely essential for both clients and brokers.
Many clients simply don’t understand the costs and importance of having the protection and the options available,” reports Investec business development manager Peter Izard.
Meanwhile, some, such as Bradley, say that refining interpersonal skills is key, because “it will enable them to read the conversation with clients and judge the most appropriate time to discuss protection”.
Bryan expresses a similar view. He says that “brokers would likely benefit from specific training regarding broaching difficult topics with their clients, such as poor health and the financial impacts”. Furthermore, “having these difficult conversations shows commitment and a duty of care from the mortgage broker, which will ultimately benefit their client relationship”.
It remains to be said that, as well as doing the best for your client, bringing up protection simply makes good business sense. “It provides,” says Hammond, “a great way to keep in contact with clients on a regular basis, while providing a greatly appreciated renewal commission.
“Once brokers understand this and see the benefits, I’m sure most will work the protection recommendation into their sales process on a more regular basis,” he concludes, pointing towards a bright – and prudent – future. And who can argue with that?