Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…
Protection: Moving forward is the second Association of Mortgage Intermediaries Viewpoint report on this important subject. Last year’s research set out to understand where we were – as an industry and from a consumer perspective – and to provide insight to help identify the areas that needed work and attention. Equipped with this foundation, our aim this year was to delve deeper into specific topics, particularly around trust and the barriers and drivers to purchase.
When it comes to insurance, too many consumers distrust their adviser’s motivations. This is disappointing but not surprising given the level of distrust in insurance at a societal level (the FCA’s 2020 Financial Lives Survey found that out of the UK financial institutions tested, adults have the least trust in insurance companies).
Last year 52% of consumers said they felt their adviser only mentioned protection to increase their commission and not to ensure they are protected financially. We have seen a similar view this year (42%). To draw on a positive, it is reassuring that we are seeing a steady message from consumers for a consecutive year as it highlights that it’s an area of priority for advice firms. Plus 5,000 consumers can’t be wrong.
It’s clear that this distrust is a barrier to mortgage protection advice – 55% of consumers have never purchased protection from their mortgage broker (almost 1 in 4 bought elsewhere, rising to 1 in 3 18-34 year olds).
However, encouragingly we found that nearly half of consumers (47%) would change their view, specifically if the adviser:
Took more time to talk about protection (14%).
Explained why they felt a protection discussion was important (20%).
Put more emphasis on how protection products could help them (19%).
It starts with how a mortgage adviser explains and cements their role during initial customer contact. A customer should have a clear understanding that their mortgage adviser’s job is not only to source a mortgage but to ensure they can withstand financial shocks once they are in their home. This means that when the topic of protection is introduced, it’s not out of the blue.
A great analogy shared recently by an adviser is that it’s like going to a shoe shop and being asked by the sales assistant at the till whether you’d like to buy shoe polish. Even though the product is relevant and may be needed, the manner in which it’s presented puts most people on the defence and leaves them feeling like it’s only being mentioned as part of a last ditch attempt to get more money from their pockets.
Embedding protection into the mortgage advice journey so it’s not seen as an add-on or an afterthought is therefore also key. This is a delicate balance to achieve; if referenced too often it can have the opposite effect and result in the customer feeling like they’re being sold to, or at worst they become disengaged and switch off. Firms may find AMI’s non-commercial consumer facing leaflet ‘Protection insurance – what should I know?’ (created in association with the Protection Distributors Group and Protection Review) a useful tool when introducing the concept of protection.
We’ve heard from firms that have reviewed last year’s research and explored within their businesses how they could position protection more effectively. After developing and trialling different processes these firms have settled on a process that they feel works for them and their customer base. This has included focusing less on product names and more on what the products do, as well as bringing mortgage warning statements to life to encourage customers to play an active part in identifying and recognising the risks they may face.
It can be easy to succumb to the thought that the insurance trust battle is too large to overcome but if we focus on what we can control and influence, collectively we can start to make a difference.
Stacy Reeve, Senior Policy Adviser
AMI, January 2022