Blog: Mortgage Brokers Choose Life!

During a recent trip to the US, a piece of research from LIMRA (a worldwide association of insurance and financial services companies) really struck a chord with me.

Against a backdrop of more households saying they needed life assurance, individual ownership was at a 50-year low.

The report claimed that lack of access to advice was the root cause for the nation's looming protection deficit.

It's a compelling argument and one where it's not hard to draw parallels with our own situation.

The UK's protection gap currently stands at a colossal £2.4tn with the average British consumer either living without life insurance or having woefully inadequate provision.

Yet to date, distribution of protection products has not been taken up by all those who advise consumers on their financial needs leaving many people to slip through the net.

All of which means we should be extremely encouraged to see that mortgage brokers looking to fill the void by extending their offering in the protection space.

With mortgage transactions at an all-time low, it makes clear sense for brokers to fill the income gap with advice and sales on products such as life cover.

House purchase is one of the key life event triggers for people to shop for life assurance. Often though it is not raised or the consumer is not advised effectively - leaving them without adequate cover. When looking at total cover needs, too often the solution is limited to mortgage cover alone, not covering the wider protection need of the consumers.

The very high percentage of mortgages being conducted by mortgage brokers is a clear indication that the community is well regarded and trusted by consumers - who are extremely happy with the service they have received.

They are therefore naturally receptive to receiving advice on a broader range of financial needs too.

What's more, with the FSA's Mortgage Market Review (MMR) still a year away, brokers are in the privileged position to nurture this personal relationship with families of all income levels.

By contrast, in the pensions and investment space, RDR will leave mass affluent and lower income families without access to face to face advice on this level.

And it is not only consumers who are searching for a new mortgage that should be targeted. The incredibly valuable customer databases that brokers hold are a goldmine of information and should be mined.

What will be interesting to see is whether the alignment between protection and mortgages can extend further?

Certainly there's a clear need for greater uptake of IP and critical illness products and, arguably ill health or loss of employment has significant bearing on whether you can continue to fund your mortgage too.

These are complex products which do not sit easily within the simplified advice framework, so require face to face advice.

But it's precisely because of this complexity that brokers might be coy about entering the market - particularly as the industry still bears the scars of the PPI miss-selling scandal.

Still, at a time when most UK families can only survive an estimated three months if they lose their income, the need for someone trusted to address this issue is clear.

Paul Yates is business development director at Avelo