Review: General Insurance
Intergenerational advice Since the start of the year we have seen the rise of a new breed of loan, the intergenerational mortgage. The aim of this product is to help families pass down assets to younger generations, by providing parents and grandparents with the ability to use their own property to help their children and grandchildren get on the housing ladder. Today, 50-70 year-olds, who typically bought their first homes in their 20s, are richer than they could have imagined thanks to long-term rising property prices. According to the Office of National Statistics a property purchased for an average of £12-£13,000 in 1976 would be worth approximately £292,000 today. Intergenerational mortgages provide family members with a way to put up the equity in their property as security on the purchase of a home for a younger family member. Parents and grandparents putting up their home as security for the loan are putting not just their property but their entire financial security at risk, a nest egg they have worked for and paid for throughout their lives, therefore for the new breed of intergenerational mortgage clients good protection advice is invaluable. As mentioned previously, later life borrowers are often the ones paying
Paul Thompson founder and chief executive, Cavere Intermediary
too much for protection, so a review could not only help reduce their costs but provide valuable peace of mind from knowing they have the right cover in place before investing in younger family members. For the buyer, protection is the first line of defence for both themselves and their generous benefactors. Whether or not this type of loan becomes a main stream product or simply fills a niche gap in the market, remains to be seen. According to the London School of Economics around 50% of parents now provide money for some or all of their children’s property deposit, while approximately 20% pay for stamp duty or legal costs, and around 10% help with monthly mortgage payments, therefore talking about protection has never been more important. I talk a lot about service, quality and value and about how enlightened brokers are those that take the time to constantly keep in touch with customers, understand their changing requirements and financial concerns. A full protection review may not always result in a sale but it will always result in a deeper relationship, a relationship that could endure from generation to generation.
A hunger for protection education With the retirement gap continuing to widen, over the last few years we’ve seen an increase in the number of later life borrowers, i.e. those turning to their home to boost their income in retirement. Indeed equity release resulted in homes paying out more than £10m a day in 2018, as lending reached a record high of £3.9bn last year (Equity Release Council). Later life borrowers are a growing market for intermediaries. As lending becomes more mainstream the older audience are increasingly looking to brokers and advisers to educate them on their borrowing options. However, it is equally important that they
be provided with trusted advice around protection. Later Life borrowers tend to shop around less, switch less, and use aggregators less, they are therefore the clients most likely to be paying too much for their home insurance. In our experience when advisers take the time to sit down with older clients to review their current protection solutions they not only save them a great deal of money but also improve the quality of cover provided. Later Life borrowers are hungry for protection education. They value advice, service and peace of mind, playing to your strengths as intermediaries.
Back on the Trail Unfortunately, unfair trail commission practices have once again reared their ugly head, despite the Paymentshield scandal a few years ago. Several brokers have been in touch to tell me that they’ve received letters from their GI provider informing them that their trail commission is being reduced and in some cases cut altogether. This is surely a self-destruct button for a provider to push.
“Why on earth at a time when service and price are at the top of the agenda for the FCA would any GI provider put such pressure on its intermediary partners?” Why on earth at a time when service and price are at the top of the agenda for the FCA would any GI provider put such pressure on its intermediary partners? It is my strongly held belief that great service is not delivered for free. If customers are to be educated and helped to make an informed decision on the right cover for their circumstances, then intermediaries need to be rewarded appropriately. Commission from just one year’s premium on some policies is often not enough to cover this cost, meaning trail commission is very important. If you have received such a letter from your GI provider then my advice is, shop around for a new one.