Since the introduction of the Mortgage Market Review rules in April 2014, increasing numbers of mortgage advisers say there is no longer time to explore protection as part of a mortgage interview.
A new service from Royal London, currently being piloted with London & Country, has huge potential to address this problem.
Using machine learning, predictive analytics and the data the adviser captures as part of the mortgage application process, the company has introduced an innovative eligibility service. This gives an instant underwriting decision and provides certainty to borrowers over the cost of protection cover immediately. The service is integrated directly to the systems the adviser uses themselves to capture mortgage application data.
London & Country currently uses its own in-house system for this. But in the future there would be huge advantages if Royal London was to build integrations with client management systems like 360Dotnet and Intelliflo as well as mortgage sourcing systems like, Iress XPlan Mortgage, Mortgage Brain and Twenty7Tec.
Once the client and adviser have agreed which mortgage they wish to proceed with, London and Country advisers progress to the protection discussion. Presently the streamlined process is only available for level and decreasing life cover, although Royal London hopes to add critical illness from around September onwards and income protection is on the roadmap. In the interim L&C has put processes in place to ensure the streamlined process is only offered to applicants who do not currently want critical Illness as part of their term cover.
To check eligibility, clients only need to answer three underwriting questions and three lifestyle questions (smoker status, height and weight). The medical questions explore the history of applicants without addressing specific conditions. The questions may vary based on the profile of the business written by the partner. The necessary information from the mortgage underwriting data is extracted seamlessly and provided to Royal London.
It takes about 10 seconds to confirm if the applicant is eligible. The insurer has deliberately designed the service so ineligible clients are not declined by taking the level of detail that could warrant a decline, so ensuring they do not have to disclose a decline in future.
Although the service uses normal Royal London rates, it expects to accept more people than it would using a traditional underwriting approach. Up to 80 per cent of proposers are expected to be accepted this way. If ineligible for this service, clients can still apply in the normal way. Streamlined acceptance is available for purchases and re-mortgages for clients up to age 55, and cover up to £500,000.
Once accepted, the service creates a case in the Royal London new business system which is pre-populated with all the data already captured. When the cover needs to go in force, the adviser goes into the Royal London extranet which works in the normal way, but without the need to go through underwriting, and enters the start date for the policy.
Having obtained Royal London terms, the adviser can give the client the option of whole-of-market quotes, which would then need to be processed using traditional underwriting, or the client can opt for the ease and simplicity of Royal London.
Lucy Brown, head of protection at L&C – which has been running the pilot with Royal London since the end of March – positively enthuses about the service, saying “It’s fantastic to see a provider not just talking about innovation but actually doing something about it. Also, it recognises that while protection is a natural sale alongside a mortgage, it is difficult for the adviser to fit everything in.
“This service gives our advisers confidence that there will be an acceptance and there are not then a load of barriers, underwriting, GP reports and medicals that they have to get through. It also gives certainty of pricing as opposed to going through a lengthy process and then finding the price is different. Overall, this delivers a far better customer experience, customers have an expectation of streamlined process.”
At the end of the pilot Royal London anticipates offering this service to a selected number of scale distribution partners. It believes it will operate equally well in a single tie, panel or whole-of-market environment.
“Game changer” is an overused phrase in technology adoption but in this case I do not think that this is an exaggeration. Royal London has made itself a hugely attractive partner for any mortgage advice firm that wants to ensure more of their customers take the protection cover they need. This initiative, which should genuinely grow the protection market, deserves to be warmly applauded. I will be fascinated to see how other insurers respond.
Ian McKenna is director of the Finance & Technology Research Centre