The outlook after Covid-19

A couple of weeks ago we announced our collaboration with UnderwriteMe, where we’ll offer our member firms access to the Protection Platform.  Why now?  Well, amongst other reasons, never has protection insurance been more desperately called upon and this platform is the ideal ‘stepping on’ point. Coronavirus is a life (and business) changing event and all those mortgage advisers who ‘don’t really do’ protection are looking for an alternate revenue stream. With a reportedly huge increase in protection enquiries, that well-known adage that ‘protection is sold, not bought’, has been flipped on its head by a public that is terrified for its financial well-being.

This pandemic has brought into sharp focus many things, obviously the most important of which is human suffering, illness, isolation and tragically, death. However, from an insurance perspective, we now have proof that what industry research has been showing, for a VERY LONG TIME, about savings and financial sustainability, is true. Most people could NOT survive without their income for more than a few months[1]. Indeed almost 18% of people couldn’t survive for more than one week. One week. The government has recommended a period of 14 days isolation if someone in your household has shown symptoms. 2 in 5 Brits get no more than a month of sick pay… And 16.1% get none at all[2]. This truly is a wake-up call for advisers, who must realise the importance of the role they play in helping clients take out the right protection products for their needs.

Work I’ve been doing recently has confirmed to me that at least 25% of the mortgage adviser population weren’t even asking their clients about their protection needs. With an estimate of well over quarter of a million people who have been confirmed to have had Coronavirus, deaths of 37,500 and 1m people in the UK expected to lose their jobs, despite the government furlough scheme, advisers who opted out of the protection conversation, or who only mentioned it at the end of a lengthy mortgage process will surely be feeling worried.

What percentage of those people who self-isolated will struggle to pay their mortgage? How many people were hospitalised, ventilated, put into a coma as a result of contracting the disease? What number of soon-to-be-unemployed people will have taken out a new mortgage over the last few years? How many of these people would have had some level of financial protection under income protection, unemployment cover or critical illness cover if only their adviser had taken the time to offer truly bespoke advice?

It seems to me that those advisers who are now trying to get mortgage payment holidays from lenders for their clients perhaps wouldn’t have needed to have done that had they sold the right protection at outset – seems a reasonable assumption? Advisers often use

lack of time as a reason for not having offered protection insurance but how much more time are they now spending stuck in a queue trying to get those payment holidays?

How much better would it have felt to have been able to proactively call a client and say ‘It’s ok, we’ve got this. You’re covered.’ rather than wait for calls to come in from clients saying, ‘I can’t pay my mortgage’?

It’s not news that I believe lenders have a moral duty to clients to make sure they have measures in place to help them pay back their mortgage loans, before handing over the money but they aren’t doing anything about that, so isn’t NOW the time to take matters into our own hands? Add a line of our own into the mortgage application forms that lays out the clear prioritisation of protection insurance within the mortgage conversation.

I see articles published almost daily talking about how well we’ve done as an industry to adapt to this strange ‘new normal’ but have we really learned anything? What are we going to do differently from here on in?

If the lenders won’t put more effort into making sure an adviser helps a client protect their loan at outset (and here I have to praise Nationwide for its 12 month ‘no repossession’ pledge[3] but…); then it leaves advisers having to accept the responsibility not just for selling more protection insurance but for selling more of the RIGHT protection insurance.

What percentage of those people who have taken out Life Cover will actually die during the term of the policy? According to Royal London, a male, aged 35, has a 3% chance of dying before he reaches 65 but an 11% chance of being diagnosed with a critical illness. The percentage likelihood of being off work for 2 months or more rises to 26%[4]!

8 ½ times more likely than dying, so why isn’t IP the first cover discussed rather than the last?

The conversation must start with what a client actually needs… GI and IP, followed by CI and then Life cover, rather than starting with Life.  Flip the conversation on its head. Carve the budget for protection out of the mortgage loan straight off the bat, be upfront and don’t ever, ever say you didn’t have time for the right conversation… right now we have nothing but time it seems, so use it wisely.

This article first appeared in Mortgage Introducer June 2020

[1] https://www.nationwide.co.uk/guides/news/all-news/2020/05/home-support-package

[2] The facts about the risks you face report, Royal London

Data source: The Institute and Faculty of Actuaries’ Continuous Mortality Investigation insured lives incidence rates. Incidence rates for the entire population may be different to those lives that take out insurance products.

[3] 56.6% of households would not be able to survive financially for more than 3 months if they did not have their main household income.

[4] All statistics Drewberry Protection insurance survey 2018