October 2021 |

Where are you on ancillary?

Martin Reynolds is CEO of SimplyBiz Mortgages

The life of a mortgage broker is never dull, and no doubt never will be. If we just look at the past 12 months you have had to help clients with support and advice around payment holidays, furlough, bounce back loans, stamp duty holiday, how to calculate self-employed income and thousands of criteria changes – both positive and negative.

So, after all that, am I wrong to challenge you and say are you “just” a mortgage broker or should that business introduction state you are a mortgage and insurance broker? Do you class protection and general insurance as ancillary sales, or a key function of your job?

The simple answer is what permissions you hold, and whether you use all of them on a regular basis. Whilst this is always an important point, it is on the agenda of the FCA now and so should be one on which you challenge yourself.

But what is ancillary, and how much do you embrace it?

We’ll take them one at a time, in the order of importance that we perceive them based on feedback from our members.

Protection always follows the mortgage in importance. However, data we see still shows that a good penetration rate in the market is still only 30%-35%. Only a third of clients walk away being protected and that may be even lower depending on how you calculate your policy count. Do you count multiple policies for one client as one or as the number of policies?  We do have a duty of care to our clients to ensure that they fully understand the risks of not protecting themselves and the loans. Ensuring that this is reviewed on a regular basis and continual signposting is important. This duty of care has never been more evident than during the pandemic which has put the forefront of health (both mental and physical), wellbeing and safeguarding family at the forefront of everyone’s minds.

The order in which we talk to clients about protection is also changing. We have just had an industry Income Protection (IP) Week which has seen many debates, webinars and thoughtful presentations highlighting the importance of IP. 

There is a school of thought that this is maybe the most important protection policy, and so do we invert the protection triangle and talk about this first, then critical illness and finally life? There is plenty of material, support and training courses in the market to ensure you have the right skills to help more clients.

Next on the list it is protection related, but we are seeing more of a demand for Private Medical Insurance (PMI) post the pandemic. Are people feeling more vulnerable or anxious about the level of stress on the NHS?  Many are now referring into specialist PMI brokers to help their clients.

General insurance is normally next on the list. It is the one part of the mortgage process that brings with it a legal requirement and that is for your client to have buildings insurance. What we do know from research is that potentially up to six million households have no insurances – either building or contents. Admittedly not all of these will have a mortgage, or even own their own home, but it is a worrying statistic. Feedback from providers is that again penetration rates are low on average; around the 25% point within the intermediary space. Historically, we know that the price comparison sites have been a favourite for the consumer where they are looking at the cheapest price rather than the most appropriate policy.

Times may be changing though, and in your favour. The new policy changes from the FCA have banned price walking and I believe that we will be the first step in the levelling off of pricing – both across different distributions and between initial and renewal premiums. This will mean that the value of the policy cover should become more important, and you are in an excellent position to fill that need.

Conveyancing has always been a marmite ancillary sale, but we are seeing more and more technology-based solutions.  In addition, the fact that many lenders now offer the choice of free legals or a cashback for remortgages, then the time to put you and your clients in greater control of the transaction is surely here.

The final two ancillary sale areas are private surveys and wills. Both do not tend to figure high on the adviser/client list of discussions, but both offer another form of protection for the client and should be considered more.

With more lenders offering free valuations on purchase products, fewer and fewer clients really understand the true condition of the property they are buying, and with the challenges consumers face in terms of depleted stock levels there is the question of whether they are more likely to consider something that is not in perfect condition? The private survey again puts the client in control and provides them with greater transparency to make the right decision.

The above list looks like a thankless task to consider on all applications but by embracing technology, where applicable, utilising the skill sets of all of the people in your business and creating the right processes, ancillary sales stop being ancillary and just become part of your service.