As the link between mortgage brokers and protection sales shows signs of weakening, calls for cover to be a mandatory part of the conversation have come to the fore again.
Gary Little, who moved from the Society of Mortgage Professionals to LSL’s mortgage club TMA at the end of last year, told FTAdviser there is often a reluctance among advisers to sell protection insurance, with its similarities to the widely mis-sold payment protection insurance partly to blame.
“As a nation we’re chronically underinsured, which is an opportunity that needs to be seized,” he stated. “Protection must be a mandatory part of the mortgage advice process; how can you not talk though protecting a known debt?”
Steve Bryan, director of intermediary at Legal & General, said the protection conversation needs to be made an easier one for mortgage brokers, as most clients are simply not thinking about the consequences of a lack of cover while trying to buy a house.
“Theoretically, depending on an adviser’s network host, it is a mandatory part of the mortgage conversation from a compliance standpoint,” he pointed out.
In July, Sesame Bankhall Group’s sales director Mark Graves warned brokers could find themselves dealing with costly complaints if they avoid discussing the need to protect against the impact of long-term sickness, which could prevent them from paying their mortgage.
“From a network’s perspective, if you don’t complete adequate notes to say the client was informed about the need to take out income protection, then you’re vulnerable to claims further down the line,” he said at this year’s Protection Review conference.
At the conference Protection Review chief executive Kevin Carr revealed survey results showing most brokers disregard selling protection, with 61 per cent stating the current relationship is broken.
Sesame Bankhall’s Mr Graves called it a “dereliction of duty” for advisers not to raise the need for protection with clients, saying they had a “moral obligation” to do so. He stopped short of calling for it to be mandatory like buildings insurance.
Michael Aldridge, innovation director at London & Country Mortgages, admitted many mortgage intermediaries treat protection as an afterthought, rather than an integral part of the fact-find and advice process.
“Some advisers don’t know when to introduce protection – some maybe try to sell it at the wrong time – others will argue customers aren’t that interested and PPI has put them off. Some blame a lack of knowledge, with products perceived to be complex and constantly changing,” he stated.
Robert Sinclair, chief executive at the Association of Mortgage Intermediaries, said many mortgage advisory firms are reviewing how protection sales are managed by advisers, with many looking to outsource it if there’s not enough time or resource available in-house.
He said he did not expect action from the government or regulator on this issue, as the latter would rather steer clear of compulsion.
peter.walker@ft.com
