LifeQuote has predicted an increase in protection sales as a result of the Mortgage Market Review (MMR), as prudent lenders consider a borrower’s ability to pay, not just as a result of employment issues but also ill health.
The firm believes that while life insurance and critical illness do not feature in the MMR, the overriding principles on lenders as to whether the ‘customer can afford the loan’ and the requirement ‘to verify the customer’s income’ will mean that the consequences of ill health or accidents should be given equal prominence to the loss of an income through redundancy.
One in four men and one in five women will suffer from a critical illness before they reach age 65. In comparison, since 2007, one in seven people were made redundant so, while the chance of losing your income through redundancy is much higher, the risks are comparable.
It will require some brokers and lenders to change their processes, LifeQuote said. Providing meaningful advice and potential solutions for a 25 year old, healthy couple, who might only need decreasing terms is not the issue. However, arguably more important will be the older buyer with some health issues, who, statistically, is more likely to need it. Research, obtaining quotes and running the administration can be complex and we expect more brokers to outsource this activity for complex cases.
Neil McCarthy, sales and marketing director of LifeQuote, said: “Post-MMR I foresee a day when lenders, if not the FCA, make it mandatory to have a conversation about appropriate protection cover being in place. While this will require more work, the financial rewards will make this worthwhile as the average protection product purchased through us pays circa £900 – £1,000 in commission.
“This is normally for clients buying multi-product solutions linked to their mortgage or personal protection requirements, with modest sums assured providing benefits of typically £150,000 – £300,000.”