explains Hall. “With Household, Buildings & Contents, every one of an adviser’s clients will buy this - so why not through the adviser - why let them buy direct from the lender or from another broker or direct seller?
“The opportunities are endless,
from home and MPPI to all forms of commercial. Ask yourself, how many self- employed or business people you have. Each of those will be buying commercial insurance - this can be a significant income stream to you even if you just introduce it to another authorised firm. “We have seen premiums recently of £20,000 to £30,000 which in turn bring commission in to agents of several thousand pounds. It doesn’t take many of them to make up the lost income.”
the Problem with mPPi Some advisers complain that MPPI is not fit for purpose and that the product needs to be improved before they can sell it.
“MPPI does need to change,” Paterson believes. ”Too many providers are fiddling at the edge and repositioning the product with some extra bells and whistles hoping that’s enough. “The main problem is that the product is underwritten at the point of claim. This is wrong and results in a level of declination that’s not proportionate. Providers need to ask enough questions to underwrite each individual policy upfront.”
But Hall disagrees. “If it is sold properly it is fit for purpose. Some advisers use the example that only nine out of 10 claims are paid, but when you look at the reason for a claim not being paid it is always a valid reason - a pre-existing condition or unemployment in the initial exclusion period. “Insurers expect any complaint going to the Financial Services Ombudsman to be found in the client’s favour so when it comes to declining a claim insurers don’t take the decision lightly. If you sell the policy properly you will highlight to the client that they can’t claim for pre-existing conditions.”
But the fact that new products are starting to emerge suggests there may have been a problem. Galjaard cites
Paymentshield’s product IncomeShield as an example. “These products are there to insure income rather than a loan or mortgage so are much more flexible for the customer,” he says.
“They can be used to protect whatever is essential for the customer. They also have an annual review process which makes the costs and benefits very transparent to customer.”
A Perfect Storm The Bank of England is set to raise interest rates to curb inflation that is well above target. Lenders have already priced in a rate hike to mortgage products. But what will this mean for clients? “This will only make things more difficult for clients unable to earn but don’t wait until it’s too late for the client to buy the policy - step up to the plate now and ensure your customers are adequately protected,” Hall advises.
Paterson says that the first thing on a
broker’s agenda should be “what am I going to do about protecting my client’s income?” It’s here brokers should be concentrating their efforts.
“At the same time people need to take
more responsibility for their actions,” says Paterson. “When taking out such a big a responsibility as a mortgage we are entitled as a society to ask how are you going to meet the repayments should you fall ill, have an accident or become unemployed?” It’s a moot point and one on which Hall
agrees. “I read in the trade press all the time about the affordability of cover. When it comes to MPPI and income protection surely it’s about whether the client can afford to be without the cover if they lose their job. How will they pay their mortgage and maintain a lifestyle for their family?”
And there’s the rub. With the Institute of Public Policy Research saying we are in for a double dip in unemployment, a near- term rate rise perhaps choking off the country’s economic recovery and the full effects of government austerity measures expected to kick in this year, the question brokers should be asking themselves is: how hard a sell is general insurance? n
mortgage Introducer APRIL 2011 49
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