We have just seen the worst set of mortgage lending results for decades, which confirms that any hoped-for spring bounce just did not materialise. Where mortgages are being taken out, it looks like the Bank of Mum and Dad is a significant contributor to any deposit and often the client age profiles are older. This has an impact on protec-tion needs, which I will return to shortly.
In the mortgage application process, I like the decision in principle approach. When applicants finally apply to the lender, they should not be turned down as their circum-stances have been assessed and the mortgage agreed in principle – obviously not the case in all circumstances.
It is not quite as easy to get a decision in principle on life, critical-illness and income protection cases as there is no consistent process across the industry, which often results in “multi-propping” – an expensive process for all parties.
There are a number of dyna-mics that have been changing over the past decade that are driving increased protection needs into later life. These include increased longevity, much better medical intervention, mortgages being taken out later in life and for longer terms, debt becoming more acceptable, state retire-ment ages increasing, aspir-ational retirement dates being pushed further into the future, later marriages and families at older ages result in broader and higher levels of cover being taken out later in life and for longer terms.
Putting straightforward term cases in place for healthy 28-year-olds for a 25-year mortgage is easy. The harder job is placing 40-year-olds who need a combination of flexible income protection, family income benefit, level term and critical illness. A colleague of mine is of the view that an applicant for protection policies should not be declined or have part of their cover declined if the adviser has adequately resear-ched their medical conditions beforehand and investigated the providers’ position before submitting an application.
Before I get abusive emails, I know in reality clients do not fully realise the implication of their medical history and the current processes mean you have to submit detailed infor-mation to each underwriting desk and often the terms will be subject to full medical disclosures, usually involving a PMA which, while correct, delays the decision.
Sometimes it is these complications that stop advisers recommending more income protection and critical-illness policies, which, while more expensive for the customer, often provide better long-term solutions for customers requiring protection into older ages than simple term life.
As more advisers focus on delivering “living benefits”, that is, the flexible criticalillness and serious-illness policies and long-term income protection policies, to enable customers to eventually reach their investment and retire-ment goals, so we need to have better processes to avoid the duplication and wasted costs associated with “multi-propping” cases. Getting to the right premium earlier in the process remains a challenge.
Neil McCarthy is sales and marketing director at Direct Life and Pension Services