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Is a crumbling mortgage market positive for protection?

Direct Life & Pensions sales and marketing director Richard Verdin thinks it could well be. He predicts the slowdown in the mortgage market will see a direct boost to protection sales because it will incentivise advisers to sell protection to maintain revenue.

The Bank of England recorded a 20 per cent year-on-year drop in mortgage lending in September suggesting the five recent interest rate rises and uncertainty about the credit crunch are dampening demand for mortgages.

Verdin says mortgage brokers have recognised the slowing mortgage market will reduce their income and are turning their focus to protection.

He says: “Focusing on protection is one of a range of tools mortgage advisers have to maintain their position in the market and their revenue. I haven’t seen a business not looking at protection.”

Meanwhile Lifesearch has developed two guaranteed life insurance products with separate life offices and is set to trial them alongside each other to gauge consumer interest.

Both of the products will require tele-interviewing, a medical and, where necessary, a GP report at the outset but policyholders will be guaranteed a payout if they make a valid claim.

Premiums with one provider will be 10-15 per cent more expensive than an ordinary life insurance policy, to cover the cost of the guarantee and increased underwriting, while the other provider will charge £3 extra for premiums.

Lifesearch advisers will begin discussing the two products with relevant customers in the next month and will stop offering them when both products have sold around 100 policies. If the trial is successful the guaranteed element will likely be extended to critical illness cover.

Money Marketing revealed last month that Norwich Union was researching a similar product. Is NU working with Lifesearch? It would not surprise me.

In other news Pioneer is looking to offer financial underwriting at application, rather than at the point of claim, to all its income protection applicants.

The firm currently offers financial underwriting at application to those in low risk occupations with its professional income protection plan but is planning to extend this benefit to all occupation classes, including high risk.

Financial underwriting at application ensures policyholders receive the amount of insurance they pay for. Other income protection providers financially underwrite at the point of claim which means a policyholder may receive less if they are earning less at that point.

Premiums would likely be guaranteed and rates would vary between males and females and smokers and non-smokers, like with the Pip plan.

Pioneer chief executive Andy Chapman says: “Pip gives people the certainty that if they have bought £100,000 of cover they will receive it, even if they are earning less at the point of claim. We believe this has got to be good for everyone not just professionals.”

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