Death . . . and the salesman

Ding dong. It's your career calling. What would you do if your clients were being stolen by the competition? You'd give them a reason to stay of course. MPA's Andrea Lavigne gives you tips and tricks to successfully add insurance to your client services and boost customer retention

Think selling insurance is about plaid suits, scare tactics and the hard sell? Think again.

Mortgage brokers turned off by the old stigma of door-to-door life insurance salesmen are missing a fantastic opportunity to provide better care for their customers and ultimately better their bottom line.

While selling insurance is a little different from providing mortgage advice, the two are not incompatible. Successful mortgage brokers who play on both teams are knowledgeable, caring and solutions-orientated.

Why bother?

Anecdotal evidence from brokers operating under NAB's insurance arm MLC suggests that every one in two customers who are not insured are prepared to take out some form of insurance.

And there are massive levels of under insurance in Australia.

About 31% of all Australian adults aged 18-59 are not covered by life insurance. One in three cite a lack of understanding for not owning insurance, while over half don't believe they need it. The hard truth, however, is that there are 57,500 widows between the ages of 25 to 54 and the average length of widowhood is 15 years.

Equally disturbing is one in three Australians will be off work for more than three months during their working life due to illness or injury. Recent statistics from TNS Research reveal that 60% of Australian families with dependents will run out of money within 12 months if the main income earner dies.

Mortgage brokers who have already crossed the threshold into insurance suggest they felt it was their duty to offer protection to clients.

Katrina Rowlands, principal of Mortgage Success, has been offering insurance through Lifestyle_ since December last year.

"I honestly believe it's an offering that has to be made to everybody and it's up to [the customer] what they do with it," she says. "I think it has shown a greater level of care for our client, not only in the initial set-up of the loan, but also the long-term maintenance of their ability to repay."

Steve Netting, general manager of Lifestyle_ says that while duty of care is oft cited as one reason for moving into the insurance sphere, so is diversification.

"The market at the moment - with banks increasing their presence and competing harder with brokers while at the same time cutting broker commission, with consumer confidence down and regulation on the way - all means that [there's] no better time to make some changes to expand your business."

Trusted advice

So you care about your clients and you want to diversify your product offerings, but are you the right person for the job?

Joe Mennea, head of third party broking services at AIG, says be believes all brokers can sell insurance.

"The mortgage broker is sought by the customer as the 'font of all finance knowledge' and customers seek out the broker and also place them in a position of trust. Hence, customers will accept listening to their broker about their finance requirements -including how to protect their financial situation."

Customers don't see it as an add-on, they see it as diligence. Brian Pillemer, executive director and head of distribution at Australian Life Insurance, says brokers who are concerned that offering insurance will have a negative impact on their mortgage business should know that "in reality the opposite is true".

"When clients are offered insurance by their broker, they readily understand the need to protect their mortgage and they appreciate the comprehensive mortgage service provided by their broker. They consider that their broker is showing concern about their future."

But being successful in this sphere isn't simply a matter of putting on your insurance hat, and away you go.

"Our experience suggests that arranging a loan and having an insurance discussion with a client are two very, very different activities requiring a very different approach," acknowledges Phil Quin-Conroy, head of licensee and insurance solutions, NAB Broker (MLC).

As the saying goes: insurance is sold, not bought.

"It's rare that a client will come in to a broker's office and ask for insurance. So they're going to need to be comfortable to raise a topic that wasn't necessarily on the table when the client came to see the broker," Quin-Conroy says.

Paul Davies, Mortgage Shield business consultant with PD Financial, says offering insurance is different than offering home loan products.

"Generally, loan products are used for buying the things you want and are glamorous to some extent, whereas insurance isn't an exciting product. Clients know they need to have it, but nobody likes insurance until they have to claim.

"Life insurance is not something a lot of people feel comfortable in talking about. I hear it a lot when they say 'I don't need insurance, I'm not thinking of dying anytime soon' - love that one," Davies adds.

Darren Joseph, director of Insureyou.com.au says brokers will have to learn to "sell a solution."

"At the risk of sounding blunt, some mortgage brokers are order takers. The client says 'I want to refinance our home loan of $500,000, so when can you come out and do the paperwork?' The broker goes out, does the paperwork and that's it. But to sell a solution, brokers need to have some understanding of how insurances can benefit a client. That may come from a real life story - someone in their family that did have insurance, or training from their aggregator."

Insurance providers suggest that brokers can help their clients identify a need for insurance by asking open-ended questions.

For example, if a broker is establishing a $500,000 loan for a client and the majority of payments are to be made by one income earner, the next question should be "what happens if you can't work due to an illness or accident for six months?" or "what happens if the main income earner unexpectedly dies?"

The point is to get the client thinking about what the consequences might be.

"Not everyone with families will succumb to the ethical thoughts of such a question, but you can't please everyone. Basically, just suggesting the outcome of a main breadwinner dying and the remaining family members left to pay off a large debt, will at least get them to think. Sometimes, it may not happen there and then, but when people's circumstances change, or there is a situation in life that makes them re-evaluate their life, in some cases, they will return and know where to come to. I'm sure brokers have come across prospects for finance similar to that," Davies says.
 
The key is to introduce the topic of insurance early and let the idea marinate with the customer.

"By broaching the topic at the start there are no surprises. It sets the tone of the relationship and most clients are then expecting the insurance information to come through," Mennea says.

By "planting the seed" the client is not going to be overwhelmed after the loan sale is completed with cross selling material. This "steak-knife mentality" often frightens the client away and cheapens the service, he adds.

The second opportunity to talk about insurance is often right after the loan has been settled.

"Most clients do not want to be bothered with insurance soon after the loan has settled; they would rather be involved with settling into their new home or neighbourhood, renovations, arranging the furniture, and generally getting on with life. The correct product will allow you to contact your clients some time after the loan settlement, say on the 1st year anniversary or 18 months after the settlement," Mennea says.

The slow introduction of insurance into the loan process is important, says Quin-Conroy, because "you're not selling a product you're solving a problem and using the product to implement the advice. It's a subtle difference".

"If, once the loan is settled, you pull a brochure out from under the desk, put it on the table and say 'I think you should really take out this insurance.' It feels like a 'do you want fries with that?' approach. The chances of success are very low."

One size?

Insurance providers agree brokers should approach all customers about insurance as part of their process. One of the biggest mistakes a broker can make is to assume a client can't afford it.

"There's no way that a broker can know where in a list of priorities insurance is for a client. They might have had an issue within the family and the problem could have been solved with insurance," Quin-Conroy says.

But not all customers are interested in the same kind of insurance

If brokers are providing advice on life insurance, the obvious customer to target would be families. Whereas income protection may be more applicable to customers reliant on the main income earner and people with large debts, "especially residential home loan debt," Darren Joseph says.

"I say that because without their home, a family then needs to make a lot of changes that can affect the family dynamics and can even bring about depression. If a client has four investment properties and their income only supports one of them, then it doesn't affect them as much, should they not be able to work for 12 months," he says.

Families working toward greater financial stability are also good candidates for income protection.

"There is nothing worse than seeing a family who has worked hard for 15 years to build their financial position, only to lose it all within one year because the husband hurt his back in a car accident that wasn't even his fault. Or to see a wife forced to sell the family home because the perfectly-fit husband passed away from an unexpected heart attack," Joseph says.

Investment-savvy clients are also prospective insurance targets. They typically want to build their portfolio and understand the consequence of unforeseen circumstances that affect their earning. The fact that income protection provides a tax deduction helps sweeten the deal.

Brokers might tailor their approach to each client as well. Identifying your client's life cycle and investment cycle is the key here.

"If you are dealing with an investment client, they will be more keen to have income protection for say a five-year term in case something happens, to allow for their investment to grow and go through an investment cycle rather than having no cover and being force to sell a good investment at the wrong time."  

Joseph also suggests brokers might be wasting their time discussing life insurance for the husband - to the husband. Chat to the wife. She is the one that will be affected the most.

"Women tend to have more family-security thoughts than the husband. Guys still believe their superman suits under their work clothes will protect them," he says.

But at the end of the day, there's no "magic bullet."

"The broker needs to attune themselves to the client and approach any sales topic accordingly. The best thing a broker can do is always keep the client's best interest in mind, understand what you are selling, and ask 'would you sell this to your partner, children, parents?'" Mennea says.