Not everyone loves the Summer months. For school and university students across the UK, the Summer term heralds hot classrooms and examination papers to be sat. For many students in the UK, there has been the added worry that having spent months studying, industrial dispute and strike action will see a lack of teachers in place to actually mark their exams and for many it has been a nervous wait to see if the examinations would actually go ahead. Contrary to popular belief, taking exams does not become a thing of the past for those leaving university. Indeed, for some it is only the beginning and certainly this has become true of the mortgage market in recent years.
The Mortgage Code Compliance Board and its statutory successor, the Financial Services Authority (FSA), have made sure of that and, despite the trepidation that most people have of formal examinations, few would dispute the benefits that ongoing learning brings consumers, intermediaries and providers.
The question however for the mortgage payment protection insurance (MPPI) market is whether or not the training available is good enough and whether it is focused enough on providing for the needs of clients. Both the Certificate for Financial Advisers (CeFA) and the Certificate in Mortgage Advice and Practice (CeMAP) contain elements that cover MPPI and the wider protection market, but they are only parts of a much broader syllabus that is geared up as a threshold level exam to see advisers begin advising clients.
Highlighting the need for cover
This is symptomatic in many ways of the real problem, which lies behind the MPPI market. It remains in many ways a secondary sale to the mortgage and something that is not always given the focus that it deserves or needs to be sold effectively. Yes, there are a number of issues with the products themselves. There is no doubt that they need to be made more flexible and offer levels of cover that are commensurate with the risks that clients offer. Neither can there be any doubt that pricing could be leaner and commissions structured at lower levels to attract more clients and so boost the amount of cover in place. However, better insurance products alone will not be enough to drive sales to the kind of levels that many advisers and providers would like to see, and create a wider blanket of protection covering more borrowers across the country.
The mortgage will always be the major purchase, but at the moment MPPI is treated in the same way as warranty insurance is treated for electrical or white goods being purchased over the counter. Why clients should perceive protecting their home and the single biggest purchase they are likely to make in their life in this fashion is inconceivable. If a greater focus were put on MPPI at the point-of-sale, then it would be possible to slowly change the view that clients have. It is not about trying to sell products that clients do not need – this is what has created so many problems for the protection market in the first place. It is about highlighting the need for cover and then seeking to match it with effective good value protection and insurance products.
The sale of MPPI should not revolve around a quick chat at the end of the sales process in which clients are asked how and if they want to protect the debt they are taking on. Whether brokers look to set up a follow up meeting with their clients or explain to them that protection is important and needs to be thoroughly discussed, it is imperative that all angles of the client’s situation are assessed. Indeed by going through a client’s situation in detail, it may actually turn out that they already have cover under policies held through their work or because of other insurances they have in place. But for many it is about exposing exactly what risks they run by remaining uncovered and providing a fully advised sale. Under the FSA rules, treating customers fairly is essential. As such, it is necessary to look at all of the possible problems that a homeowner may face and the insurances that are on offer to cover them. Making sure they can pay their mortgage in both the good and the bad times is an essential part of this advice.
Examining the market
It is also important that brokers take time to examine the market and make sure the products they are offering are the best that are available as there remains a real difference between the best and worst products. For clients who need the cover but are put off by the expense, a selection of good value products may be enough to convince them that they are being offered value for money. More expensive insurance will simply see them walk away and be forced into taking on risks they would rather not.
Firms not only need to change the way in which they sell MPPI on the back of the mortgage, but also seek to take more time to understand the individual circumstances of their client and how protection could work for them. Simply offering cover at a price per hundred pounds of mortgage on a take it or leave it basis is no good for the client or the mortgage intermediary.
Whether firms look to devise their own improvements to training or petition the examining bodies in the market to offer more detailed and demanding modules for the MPPI industry, something needs to change. Certainly given the attention being put on the MPPI market at the moment, those failing to cater correctly for clients at the front end of the sale are unlikely to impress the regulator or drive the kind of business that would benefit both their own bottom line and the financial position of their clients.
