The protection sector has a tendency to look at the mortgage advice sector with a sense of exasperation that mortgage advisers don’t sell more protection.
We have the perfect opportunity, they say, because buying a house is, alongside having children, one of the most effective triggers for a protection conversation.
Mortgage advisers can get a bit fed up with this narrative. They are experts on mortgages and the lack of protection sales is the fault of the protection market, not mortgage advisers, they tend to respond.
Mortgage advisers will respond to a simpler underwriting process
The protection industry has made the process of applying for a policy complex; and, the more important the policy — such as for income protection — the more complexity is involved, they add.
Signposting
Protection is, of course, a bedrock of good financial planning, and protection advice is extremely important. The recent focus on signposting — where mortgage advisers and independent financial advisers are encouraged to direct clients to a protection adviser rather than leave them unprotected — is a very worthwhile initiative.
At Austin Friars we’re in an unusual position of being specialists for both mortgage and protection advice, so we can see where the needs of both camps lie and where they are failing to connect.
It’s time to disrupt the industry and make underwriting more efficient
There are many things that can be done, and indeed are being done, to bring the two camps together to the advantage of both and, most importantly, for the customer. One stands out as particularly important: technology. Or rather, underwriting technology.
The amount of time and effort even the most expert protection adviser can waste on administrative tasks is significant. For a non-expert, the multiple options, provider rules, customer service and moving goalposts can make it a non-starter.
Amazon has changed the way we shop for consumer goods. Why can’t technology do the same for underwriting? That is the way to encourage wider protection advice and, for providers, it would seem to be an obvious area to push during a potential prolonged recession.
Technology should be giving an indicative quote from a range of providers
Mortgage advisers will respond to a simpler underwriting process because, in the last downturn in 2008/09, there was a significant uptick in mortgage advisers selling protection. There is an appetite, and that is likely to increase if the economy is hurting. So the protection industry has a great opportunity to make its products easier to sell for non-experts at a time when they are likely to become more responsive.
There have, of course, been improvements in underwriting technology over the past few years, but the industry needs to go further.
Next generation
So what would a next-generation underwriting system need to look like to encourage mortgage advisers and IFAs?
According to iPipeline, 30%–40% of cases that don’t go straight through the application stage need an underwriting decision. That is a time-consuming process for the adviser and an added cost for the insurer.
The industry has a great opportunity to make its products easier to sell for non-experts
Technology should be giving an indicative quote from a range of providers, based on whether the case would be loaded or declined, or have an exclusion added. That would save advisers time and mean they could advise more. It could save insurers money and consumers would be protected more quickly.
And more non-protection experts, such as mortgage brokers, would be able to write business because it would remove the need for advisers to be medical experts in order to place business with the right insurer.
Disrupt the industry
Twenty years ago, protection applications required the calling of multiple providers, the completing of multiple apps and the handling of multiple quotes. Now we use exchanges for clean cases, but not for complex cases.
The protection sector has made the process of applying for a policy complex
It’s time to disrupt the industry and make underwriting more efficient. I don’t foresee non-protection specialists writing business at scale otherwise.
Insurers must decide if they mean what they say about leadership and growth. It’s time to stop all the ‘passionate’ and ‘evangelical’ talk and start being practical and effective if they want to expand the market.
Andre Botes is the founder of Austin Friars Financial
This article featured in the February 2023 edition of MS.
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