MAR 2015 – Why is protection a hard sell?

Post the PPI scandal should more consumers take out mortgage protection and what are the benefits of doing so?

Protection has long been a product that has to be sold, evidenced by the fact that few consumers make appointments to discuss such needs and most that is sold is linked to their mortgage. The one certainty following the billions of pounds that have been paid out in compensation on PPI products is that consumers are wary of all protection products and brokers see this as a much harder sell. Indeed the huge payouts on PPI have done little to enhance the general image of insurance as a whole.

Persuading consumers that life, critical illness, income protection or payment protection are all worthy of consideration is a big ask, when there are not any tangible benefits other than “peace of mind”. It has always been perverse that people will buy protection for losses related to their belongings, health, teeth, dog and car and not insure the asset that brings in all the money.

There is also the “compliance” effect. Why get dragged into complex sales that risk fact find or suitability letter fails when you can just get the client to agree that they don’t want to discuss it. So the recent initiatives by some larger firms to force a real discussion or ensure that the client is passed to a protection specialist, who will address their genuine needs, or get a signature to say they are happy not to be protected has resonance.

What perhaps is worthy of thought is whether a fully protected sale is more valuable to the lender and if they should give a rate discount to such intelligent consumers. In the same way that many think that lenders should see those borrowers that make pension provision as a consumer who plans sensibly, not a barrier to affordability, a fully protected mortgage makes the risk of default much lower. Perhaps product innovation where the lender sees their capital and repayments at less risk could be a competitive advantage that allows a better rate to be offered. It need not be tied or bundled products, but part of a declaration process that avoid the whole KFI complexity.

Robert Sinclair
Chief Executive, AMI