"The great Winston Churchill once said “A pessimist sees the difficulty in every opportunity, an optimist sees the opportunity in every difficulty.”
The mortgage market has certainly seen its fair share of difficulty, but behaving like optimists many brokers have seized an opportunity to expand the breadth of services they offer clients and create additional income streams.
Many brokers have focussed more on protection than in previous years, but one area of protection in particular remains relatively untouched by mortgage brokers. Key person insurance is used to protect a business financially from losing its most important assets - its people.
While the majority of large organisations have this risk covered through a mix of succession planning and insurance products, many small to medium sized businesses overlook it altogether or have simply never heard of this type of cover.
The loss of a key person in a small company can have a significant impact financially as well as emotionally on the business, leaving a hole in essential expertise, or creating financial strain if sick pay is being paid whilst also having to employ someone else to cover the role for instance.
Key person insurance, or cover insured on a ‘life of another’ basis, can be taken as an option on most personal life assurance, income protection or critical illness products.
So if brokers already discuss these products with clients on a personal level, there isn’t a new product set to become familiar with before talking to the same clients about cover on a business level.
In addition, a mortgage broker is likely to have a number of clients already on their books who are owners or key people within a small to medium business, creating a ready and waiting list of potential leads.
However, the timing of getting in touch with these clients about protection has never been more important.
There are well documented significant changes impacting the protection market towards the end of this year, including the EU gender directive and I-E tax changes, which are set to push up protection premiums.
As an industry we are past the point of trying to lobby for any changes to legislation, instead we must revert to Churchill’s comment and make the best of our situation.
We expect protection premiums to rise in most cases, as the I-E tax changes will wipe out any of the benefit some people could have seen through the new pricing on gender neutrality, but this creates an opportunity now with an effective sale on protection as current prices are unlikely to be seen again for many years.
While this in itself won’t motivate clients to buy protection, the changes do provide brokers and advisers with an opportunity to introduce or revisit the subject of protection with clients.
In tough economic times everyone loves the idea that they are getting a bargain, so it is possible for brokers to work this year to their advantage and use gender as an excuse to open up a discussion or book in a review meeting.
With a pressing deadline there is an extra incentive to persuade clients to look at their protection needs seriously and take prompt action if necessary.
There will be no transitional period for cases which are going through the pipeline ahead of the gender changes, so anything not on the books by 21 December 2012 will need to be processed on gender neutral pricing.
We would recommend that applications should be submitted as early as possible, especially for income protection or critical illness cover, large cases and for those with health issues to maximise the chance that your client gets the 2012 price.
So be it to discuss personal or business protection with new or existing clients, the clock is ticking on an opportunity to help give people a reason to act now on protection. We have an opportunity to engage people in something that they rarely proactively seek out, and it gives brokers another string to their bow in the process."
