Mortgage Market Review  

Concerns over protection sales flagged with FCA

Concerns over protection sales flagged with FCA

The Financial Conduct Authority is understood to be concerned about levels of protection sales when the mortgage market is quiet.

It is understood the regulator has been alerted to instances of protection sales increasing when the mortgage market is quiet but going down when it is busy.

This raises the possibility that mortgage brokers are not offering protection to all their clients who need it consistently, but only when they need the business to make up for slower mortgage lending.

But it is understood the FCA considers the instances that is has been alerted to are isolated and has not yet found evidence of the issue being systemic.

It is understood the regulator would now only carry out more in depth work into exploring this issue if it came across evidence it was part of a wider problem.

But several figures in the advice sector - across mortgages and protection - have said this is an issue which the FCA is right to be concerned about.

Sebastian Murphy, head of mortgage finance at JLM Mortgage Services, said: "There seems to be a growing concern, from a regulatory point of view, around the disconnect between mortgage and protection sales, especially when intermediary firms are very busy with mortgage business.

"As an industry, we do need to be better at marrying the two up and ensuring that clients have adequate protection in place."

He added that JLM has introduced a training programme with all its advisers to increase their knowledge and ability to provide life and protection advice.

David Hollingworth, director of communications at L&C, said: "For us specifically we make sure we build protection into the whole process. But inevitably in the wider market you can have situations where in a very busy mortgage market, the thing that falls by the wayside a little bit is the big conversations around protection.

"This was a topic the broker market itself was looking to address before the financial crisis."

Paul Shearman, proposition director for mortgages, protection and general insurance at Openwork, said: "The FCA is right to be concerned about the low level of protection conversion across the industry generally.

"More advisers need to adopt a holistic approach to their clients, recognising the critically important role they play in delivering high quality, appropriate advice to protect clients and their families."

But Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said the mortgage market had changed in recent years, meaning the amount of remortgaging has increased, while lending to homemovers had gone down.

He said: "The remortgage market has doubled and you wouldn't see the same level of protection sales. In the last conversation I had with the FCA, they said they were reasonably happy about this."

 The latest seasonally adjusted data from the Bank of England showed remortgaging surged to 51,593 in October – up from 48,133 the previous month and well ahead of the monthly average for the previous six months of 45,670.